USS - General discussion

PJM_62

I've just taken my 2nd Flex as part of flexible retirement.
Both times I was able to use IB money to do the max tfls thing of 6.67 x pension.

Barralad77

PJM_62 said:

I've just taken my 2nd Flex as part of flexible retirement.
Both times I was able to use IB money to do the max tfls thing of 6.67 x pension.

But you took them (DB & IB) ‘together’, just fractionally. The OP would be taking one (IB) but not the other (DB), and I think that may mean they lose the ‘x 6.67’ opportunity. But best checking with USS before making any decision.

Edit: I could be confusing this with an alternative scenario where someone takes the DB but doesn’t take any/all of the possible 3,67 x pension from the IB; in that case whatever is left in the IB is only 25% tax-exempt (in other words, they will have missed the one-off opportunity to take the maximum 3.67 from the IB). 

ussdave

My understanding is that the alternative scenario in your edit is the constraint.

That said, I was completely wrong about pre-RB UFPLS so take whatever I say with a grain of salt.

PJM_62

Also there's possibly the issue of an ufpls withdrawal triggering the MPAA

guymo

PJM_62 said:

Not sure if your last point is correct. 
25% of ufpls is tax free but it's not a tfls. 

Rest sounds doable. But don't assume taking DB early results in a big overall loss. The erf isnt meant to be punitive.
Do the calcs / get a quote to compare totals when taking early and deferring.

I am as sure as I can be that the tax-free portion of a UFPLS is counted against the lump-sum allowance. 

Good point about the ERF not being punitive. From a rough calculation, the total amount of money you receive from the scheme if you retire aged 60 (7 years before NPA by the time I get there) is outweighed by what you get if you defer for 7 years, as long as you live past 81 years of age. A proper calculation here would need to estimate returns on investments for savings not spent when taking the pension early. I guess that's part of the job of the actuaries and it is just about believable that this would work out neutral. Thank you for pointing this out. 

PJM_62

guymo said:

I am as sure as I can be that the tax-free portion of a UFPLS is counted against the lump-sum allowance. 

Good point about the ERF not being punitive. From a rough calculation, the total amount of money you receive from the scheme if you retire aged 60 (7 years before NPA by the time I get there) is outweighed by what you get if you defer for 7 years, as long as you live past 81 years of age. A proper calculation here would need to estimate returns on investments for savings not spent when taking the pension early. I guess that's part of the job of the actuaries and it is just about believable that this would work out neutral. Thank you for pointing this out. 

My bad. Having googled it now , you're absolutely right about the 25% and LSA.
First time I'm ever seen that mentioned.
Maybe because it affects few people. 🤷

MarlowMallard

guymo said:

Good point about the ERF not being punitive. From a rough calculation, the total amount of money you receive from the scheme if you retire aged 60 (7 years before NPA by the time I get there) is outweighed by what you get if you defer for 7 years, as long as you live past 81 years of age. A proper calculation here would need to estimate returns on investments for savings not spent when taking the pension early. I guess that's part of the job of the actuaries and it is just about believable that this would work out neutral. Thank you for pointing this out. 

You probably don't want to defer to 67. A good feature of USS is that NPA for ERF factors is SPA back in the year you earned the benefit, not SPA when you retire, so it is 65 for pre-2018 and 66 until 2027.  (Although NHS and TPS are better than USS in many respects, they now have NPA = SPA when you retire which is worse). 
Another point to consider is if deferring + state pension + index-linking + other income takes you into 40% income tax, then you have to live to late-80s to be ahead. 

LL_USS

Hi everyone, 

Just to say first, I am not near retirement yet and I am still contributing extra (quite a bit) into the DC pot of my USS pension - normally anything that tips me over to the 40% tax bracket. 

I am still in the middle of teaching and cannot think straight about this yet - but it is at the back of my mind that our salary sacrifice pension contribution scheme is under attach. I understand that from April 2029 we can only have contribution under 2K/year exempted from NI. This 2K amount is so tiny so it's almost like the salary sacrifice NI exemption for pension contribution is scrapped. 

It is over 3 years till the change - my question is:

- Should I try to put as much as I can (under the threshold allowed) into DC pot pension, which means I hardly have any saving left for ISA etc - in the next 3+ years 

- or it doesn't matter, even after April 2029 any extra contribution still benefits from income tax exemption (just more NI) so the scheme becomes less attractive but still worth it so no need to sacrifice my take-home income to shove into the DC pension as volunteer contribution in the meantime. 

Also I can note that I will probably only want to put about 20K more into my DC pot (to have a DC pot of about 3.667 times my projected annual DB so I can take it all out in TFLS at retirement - oh well, we don't know if we still can keep that perk in the future anyway.
According to this (https://www.sjp.co.uk/individuals/news/salary-sacrifice-tax-break-on-workplace-pensions-cut) it costs the employer much more NI contributions on (any additional) pension contribution so they may not even want to make it easy for us to add more in pension. We also have to see what USS will decide as response to this.

So many uncertainties....

If anyone could comment on this for me it would be very much appreciated please.

Many thanks 

LL