USS - General discussion

MarlowMallard

mld66 said:

I have a quick question: I am about to start drawing my USS pension in October. I have just got my pension quote and my options are:
max AP= 35,537; TFLS = £29,135; DC=0
max TFLS: AP=26,867; TFLS=£179,118; DC =0
standard Option: AP = £26,867; TFLS = 146,142; DC=0

I also have the option of leaving some of my money invested in the DC part. for example,
AP; 29,891; TFLS= 100,846, DC =29,135

my question is, is there any reason (besides having a lower AP) why I shouldn't just take the max TFLS? am I missing something? I dont have an immediate need for lots of cash but it seems a bit silly not to take it tax free if I can, rather than leave some invested and pay tax on it when I withdraw it. 
thanks

 Something looks wrong here... "max TFLS" looks like "standard" plus 33k of free money...   how much is in the DC currently ? 

Anyway, one point is, when you trigger an AP, the rules say you can take up to 6.66*AP as TFC.  That's basically because the AP counts as a virtual "pot" of 20*AP under HMRC rules, and 6.66 is one-quarter of 26.66. 
So, if you only took the standard 3*AP and didn't touch the DC, you'd be leaving behind 3.66*AP which would become effectively 15% taxable when you take it out in future (1/4 tax-free and the rest at basic-rate 20%).  So it almost always makes sense to take 6.66*AP as TFC,  if you have enough in the DC pot to do that.  Of course the future growth or interest becomes taxable, but you can drip-feed into ISAs over a few years. 

Barralad77

By my maths it must be £99,000 in the DC.
Max TFLS is £179,000 (nothing left in DC) and 3 x AP is £80,000.

179,000 - 80,000 = 99,000.

That’s my reading of the numbers.

Nick_Dr1

So, if you only took the standard 3*AP and didn't touch the DC, you'd be leaving behind 3.66*AP which would become effectively 15% taxable when you take it out in future (1/4 tax-free and the rest at basic-rate 20%).  So it almost always makes sense to take 6.66*AP as TFC,  if you have enough in the DC pot to do that.  Of course the future growth or interest becomes taxable, but you can drip-feed into ISAs over a few years. 

This was the conclusion I came to as well, having been looking at similar options. The 6.67 x annuity TFLS option is a useful perk and you only get one go at it (unless you retire flexibly!)

mini850

Maybe some of the DC is in Prudential MPAVCs? that might explain the disparity in the different numbers appearing in DC pot (where maybe only IB is shown?).

Anyway I agree with @MarlowMallard and @Nick_Dr1, in most cases taking full TFC (for whatever AP you decide to choose) seems to be a sensible option.

NTFI19081

Chipping in here as just got my quote as below:

Option:                  Taking max annual pension      Standard option      Taking max tax-free lump sum      

A: Annual pension (£):   26,649.12                      21,668.52                 22,535.28                         

B: Tax-free lump sum (£):54,683.59                     144,456.80              150,234.98

IB savings remaining (£):0.00                               25,652.23                0.00

(£50,419.88 of IB are MPAVCs)

I plan to take the standard AP as I understand that buying more AP isn't great value (?). But, is the consensus here that actually taking rat least up to *6.6% of AP as TFLS both avoids triggering the MPAA and makes the most sense as otherwise this would eventually be taxed, albeit at 15%. I am plannng on moving my IB out to a SIPP which I will keep contributing to, but perhaps getting the max out without triggering MPAA makes sense if I can get into ISAs and other tax shelters. Will appreciate confirmation on my thinking on this 

PJM_62

Any particular reason for transferring the remaining IB out to a SIPP , where presumably you'll pay fees?

Barralad77

PJM_62 said:

Any particular reason for transferring the remaining IB out to a SIPP , where presumably you'll pay fees?

I think the answer lies above: you can keep putting money into a SIPP but I don’t think you’re allowed to put any more into the IB once you’ve retired/taken the DB.

NTFI19081

Barralad77 said:

PJM_62 said:

Any particular reason for transferring the remaining IB out to a SIPP , where presumably you'll pay fees?

I think the answer lies above: you can keep putting money into a SIPP but I don’t think you’re allowed to put any more into the IB once you’ve retired/taken the DB.

Yes, thats it - I want to keep adding to the DC pot.

PJM_62

Just been reading the email that USS sent out about planning for future (death).

Any Investment Builder savings you still have invested at the time you die will also go to your beneficiaries.

Anyone know how this gets paid and any tax implications for beneficiaries?

Barralad77

I ‘think’ it gets handed to whoever you’ve identified as being the beneficiary (with USS) tax-free, at least if you die prior to the age of 75. Later than that then it’s taxed. At least that’s my understanding; someone else will know better than me. But if that is the case, then the ‘planning’ will have to be really good to get the maximum out…..