USS - General discussion

MarlowMallard

https://forums.moneysavingexpert.com/discussion/comment/81875726#Comment_81875726

Yes the 3x pension plus any extra lump out of the Inv Builder counts towards the 268k. Basically any "tax free" amount from a pension counts towards the 268k. Income below the 12.5k personal allowance is "taxable" but taxed at 0% and does not count towards 268k.

MarlowMallard

From above:

" 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. "

If you take 200k at start of pension, you have 68k tax-free lumps allowance left, so you could still have up to 4 x 68k = 272k left in the Inv Builder before you would run into the 268k limit.

LL_USS

https://forums.moneysavingexpert.com/discussion/comment/81875726#Comment_81875726

I believe this 268K allowance already include 3 times the defined benefit plus defined contribution

LL_USS

https://forums.moneysavingexpert.com/discussion/comment/81875810#Comment_81875810

Thank you @MarlowMallard
okay, assuming that I will have a DC pot quite big, say £272K left after having had a part of it taken out in the Pension Commencement Lumps sum of £200K, I can still have 68K in this DC pot (25% of it) as tax free (within the threshold) and I will need to pay appropriate tax when drawing down the rest of the pot. Somehow looking at the issue this way (having "up to 4 x 68k = 272k left in the Inv Builder before you would run into the 268k limit") makes it quite a substantial allowance.
My colleague in the example only has £18K tax free allowance left (as he has already taken a TFLS of about 250K).

MarlowMallard

https://forums.moneysavingexpert.com/discussion/comment/81876461#Comment_81876461

Yes that sounds correct. This assumes your annual pension is £30k or more, so the £200k PCLS is not more than 6.66x your annual pension, in which case whatever is left in the Inv Builder is uncrystallised so you can take 25% tax free later up to £68k limit. If the pension were less than £30k and the IB is large, you would have to crystallise some of the IB to boost 6.66x pension up to £200k… or you could reverse-commute the 3x lump sum to get a larger pension, then take 6.66x that all from the IB leaving the rest uncrystallised.

LL_USS

https://forums.moneysavingexpert.com/discussion/comment/81876575#Comment_81876575

Thank you so much @MarlowMallard - I am quite slow but I am gradully clearer about this. Thank you for your explanations for both scenarios. Food for thought for me going forward regarding how much to put further into the IB pot.

NTFI19081

Hi everyone, I’m planning to retire from USS via redundancy and wanted to sanity-check the plan…

• Retirement Income Builder pension: ~£25,000 p.a.
• Standard DB lump sum: ~£75,000 (3× pension)
• Investment Builder (DC): ~£115k–£140k depending on final contributions/markets

My intention is:

• Take the standard Retirement Income Builder pension and standard lump sum (3× pension)
• Not increase lump sum by exchanging any RB pension income
• Use Investment Builder (DC) only to top up to the HMRC 25% tax-free limit. i.e. around 80k depending on value of pot.
• Leave the remaining DC invested

So effectively: DB unchanged, DC partially used to reach the 25% limit.

It seems to me that this makes use of the 25% rule, and gets me some extra TLFS to drip into ISAs over the next few years. The standard TFLS I will use as a cash buffer.

1. Has anyone successfully done this combination (standard DB + partial DC for TFLS)?
2. Did USS process it as expected, or do they tend to default to one of the standard options? i want to make sure they get it right.
3. Any issues with late contributions (e.g. redundancy salary sacrifice) being included in the final calculation? I am told redundancy salary sac will not land with uss till 4th of mth i..e 5 days post redudnancy.

I understand the figures will vary, I’m just trying to confirm USS handles this structure correctly in practice.

Cheers

Nick_Dr1

My understanding in a simple calculation is that you can take a lump sum of 6.67 x your DB pension (£25k in your case) so giving ~£167k lump sum in one go as its a hybrid pension scheme, assuming you have enough in the DC part to cover this.

Anything left in the DC scheme can then be accessed later but will only be 25% tax free then.

They ask you on the form whether your contributions will change in the last couple of months so I guess they want to check their calculations against that. However I have no idea if a big late contribution such as you suggest will be included. I suspect not but you need to ask them. If you already have enough to cover the extra 3.67x pension then I don't see it matters.

retiringin26

Might be a different situation but my standard AVCs through sal-sac don't land with USS until around at least the 8th of the month, sometimes a bit longer.

UncleTomCobley

"Has anyone successfully done this combination (standardDB + partial DC for TFLS)?"

Yes

"Did USS process it as expected, or do they tend to default to one of the standard options? i want to make sure they get it right."

It wasn't processed that well - the USS took the whole Investment Builder pot (not just the £80K in your case but the whole "~£115k–£140k" amount) After a couple of months the "£80K" was paid out and the remaining balance was returned to the pot. As such, I was "out of the market" for this time.

I did point out that this process arrangement was not in my best interests and that I had lost c.£500 (I was in the liquidity fund) on the remaining pot's balance. And…they compensated me for the loss. 😊

You may want to check this part with the USS - esp. if your residual pot is in more dynamic funds.

"Any issues with late contributions (e.g. redundancy salary sacrifice) being included in the final calculation? I am told redundancy salary sac will not land with uss till 4th of mth i..e 5 days post redudnancy."

Didn't have this extra bit