USS - General discussion

swindiff

If you have not seen it, this thread is worth a read

https://forums.moneysavingexpert.com/discussion/6439958/uss-vs-tps-university-pension-advice-needed/p1

PJM_62

As someone that recently got diagnosed with cancer, I'm glad that I didn't commute a chunk of tfls for pension. Along with my IB, I think it's better off in savings and being drawn on as necessary,  by me (or future beneficiary) until it runs out. 

kermchem

LL_USS said:

@swindiff Thank you soooooooooooooooooooooooo much. I can see now where all the numbers above fit (and the reversed commutation for 60y about the same as in the factors listed by USS). Brilliant. I did not like it very much that I was completed ignorant of those "factors" and how they link to "my numbers" as in the forecast. 

@Barralad77 and @swindiff thank you for the note regarding tax implication for increased annual pension. I will look at this again more carefully. My current thought, after your note, is that I am contributing anything over to the 40% tax threshold into my DC (plus benefitting from the NI exemption for that whole amount for now), so when I take the pension out and pay 20% tax it is fine. Together with SP it won't reach the 40% tax band anyway. I currently do priotise putting any unspent money from my take-home income into ISAs. 

I will look more into whether it's silly to "buy £2,587/year DB using £54,142". Do you mean if it's too expensive then I should try to just take DB=18K and there's another method to get more from this 54K , like just keep it in DC to invest? £54,142 invested at 5% yields £2,707/year. 

Regarding my number of years for NI contribution, it is taken from my NI record on the Gov gateway and I suppose I can only count "full years": 

I did study for too long, only working full time from 2008, first for a new university (TPS) then a red brick one (with USS pension). I think this record is right and I can only count my NI years from 2008. 

You will not be able to generate a yield of 5% long term in retirement. Look at threads that discuss safe withdrawal rate. In the US it is normal to assume 4%, and the UK value is reckoned to be a little less. 

For your NI record have look a bit further back. For many years I assumed I would need to work to 62 to get a full pension at 67, and then suddenly I found that I had been given NI credits for the years when I was 17 and 18. 

MarlowMallard

Agree with commenters above. 
Regarding the "factor 12" commutation, the TPS and Civil Service don't allow you to buy extra pension at this rate - you can only give up £1k pension for £12k lump sum which is generally regarded as a bad deal.  The USS allows commuting both ways up to limits. 
 One other point - if you retire in early 60s and are short of full state pension, you can just buy additional NI years with voluntary contributions - this is an absolute bargain as it's about £900 to buy a year and it gives you £300 pa extra pension for life. I believe you can even buy NI years after you start claiming state pension, though the increase will not be backdated. 

LL_USS

@Barralad77, @swindiff, @PJM_62, @kermchem, @MarlowMallard

thank you all - lots for me to digest and to further check - I really appreciate these. 
@kermchem- I meant even with 5% return it would not be a much better option to keep investing this amount of DC rather than buying more DB. Still more to think about I suppose. Also 2003 is my earliest record for any work ever done in the UK whilst studying am afraid ;-).

@MarlowMarllard great to know I will be able to "buy" NI contribution even when not working. 

@PJM_62 sorry to hear about your diagnosis. I do too prefer to only leave a minimum level in pension (though I am still trying to work out what is "just enough" for my DB) and take out what I can to have the flexibilty to use the money when I need. 

TeessideMag

Hi, a quick query about the USS benefits calculator. If this has been answered before I apologise in advance, I did search the forum before posting. On step 1 of the calculator it shows the expected pension, lump sum and balance in the investment builder. If I change the expected retirement age and press update these values change, as you'd expect. If I then click forward through to step 4, without changing any of the preset values (e.g. expected inflation, salary increase etc.) the final values shown at step 4 are radically different from those shown in step 1. 

Is step 1 showing me what I'd get if I stopped paying in today and then took my pension later at age X, while step 4 is showing me what I'd get if I kept paying in at the salary level I've input until I reach age X and retire?

guymo

All of the figures are projections for what you could get at the age you said you wanted to retire, although expressed in 2026 pounds so should be inflation protected (to the extent that they are accurate in the first place.)

When I use the calculator, Step 4 shows me two sets of numbers:

"1. My projection", which is exactly what I saw at Step 1 
"3. My options", which -- if just clicking through without changing anything -- has increased the tax free lump sum to the largest value it can, while (in my case) emptying out the Investment Builder pot.

What has happened is that some of my original tax-free lump sum in the "Projection" figures has been converted to annual pension in the "Options" figures. This allows a larger tax-free lump sum to be taken, using up some (in my case all) of the Investment Builder pot. 

I guess something like that is happening to you.

TeessideMag

Thank you, have just tried messing about with various permutations and that makes sense. Much appreciated.

LL_USS

I have been wondering about the 25% of value of pension pot tax free in retirement. I emailed and asked USS a year ago or so, but as usual, their reply was quite cryptic.

Thinking about it with an example today, a colleague of mine has retired, taken about £250K as the pension commencement Tax free lumpsum. Both of us were convinced that he still will received 25% of annual drawdown tax free every year later on. But thinking again today, current rules say

The maximum tax-free cash you can take from all pensions in your lifetime is generally £268,275.

So this means this person only has roughly 18K of tax-free allowance remaining. He will NOT have any more of the 25% tax free after this 18K allowance runs out. Is this right?

I would like to understand clearly then i can make decision whether putting more volunteer contribution into my DC pot even over the 3.667 times annual DB projection (to be able to take the whole DC pot out in the tax free lumpsum). Or is it still beneficial to put in over that amount. My current situation: I only put what's over to the 40% tax bracket into the DC now. If I put more than this amount into the DC pot, it will be from my gross pay which is in the 20% tax bracket. Then when drawing down, say I still have a proportion (equal £268,275 - the amount of my tax free lumpsum, say £200K = about £68K) that has 25% tax free allowance.

I am trying to see whether it is still worthwhile to put even MORE volunteer contribution now, to benefit from 20% tax saving on the way in, and 25% of the £68K tax-free allowance as drawing down, paying tax for the rest 75%.

PJM_62

Does the 3x pension lump sum count towards that 268k ?