USS - General discussion

NTFI19081

mnay thanks everyone, and @UncleTomCobley I will be sure to ask about how they go about the 'out of market' stituation.

guymo

I wonder if anyone knows definitively (e.g. from experience?) what happens in the following scenario:

Suppose I retire at the age of 60, so that in principle no actuarial reductions are applied to my pre-2011 benefits. Is it possible to defer putting the pension into payment for a year or two at this stage? What happens to the value of benefits if you do that?

If I tell the modeller "take benefits at 60" I get a bigger projection than if I tell it "leave scheme at 60 and take benefits at age 62" so I think it is applying the reductions in the latter scenario. This may be the right calculation but I'd like to know for sure. I've tried asking USS via my local pension officer but did not get an answer.

swindiff

You only qualify for not having your pre 2011 benefits from being actuarily reduced if you are still employed by the USS employer at the time you retire and take your pension. If you leave employment even for a few days and then decide to take your pension it will all be actuarily reduced. Your employer has to agree to you retiring early and taking your pension unreduced, although I have never heard that anyone has ever had this refused.

kermchem

I took a voluntary severance package at just over 60. My employer's pension office obtained a quote for me from USS, and when it was forwarded to me there was a draft letter from employer to USS confirming that I was leaving with permission. The pension I am getting is as was in the quote, so it appears the quote was on the basis of no actuarial deduction for pre-2011 benefits.

guymo

You only qualify for not having your pre 2011 benefits from being actuarily reduced if you are still employed by the USS employer at the time you retire and take your pension

Thanks — this is what the modeller makes it look like for sure. Do you have something definitive that confirms this?

The scheme rules do not seem to say that, but they are long and complicated and I am not a lawyer or pension trustee. The rules talk about the right to unreduced benefits if you retire (with employer consent) after 60, and retirement is defined as follows:

"Retirement" means the cessation, on or after minimum pension age, of employment

which gives entitlement to membership or the cessation of active membership on the

grounds of incapacity,without the member taking in either case any other

employment which would give entitlement to membership, and "Retire" and

"Retired" have corresponding meanings. A member shall be deemed to retire no

later than the date which is immediately before the member's 75th birthday

Anyway I've asked USS directly now so let's see if I get a reply.

kermchem

I have a password protected pdf file entitled "Name - notification of member's retirement Ers form", which my employer returned to USS, having provided me with a copy. It is 4 page pdf with things like my name, NI number, DoB, contact details for my former employers pension team, and the answers to questions like monthly and yearly contributions, one-off contributions (employer paid my taxable redundancy into the retirement builder), and a section headed Benefits Consent - Has employer consent for pre October 2011 benefits to be paid unreduced been granted? Yes.

I am sure there was some discussion as to what were the circumstances where the employer would say "yes" to this question, but I no longer have that correspondence.

swindiff

If you are no longer employed you can't get employer consent therefore all service will be reduced accordingly.

MarlowMallard

https://forums.moneysavingexpert.com/discussion/comment/82197444#Comment_82197444

If you are retiring at 60 with employer consent, then it's probably a loser to defer payment to 62, even if you could keep the no-actuarial-reduction pre-2011 ? You give up 2 years of payments, there is no increase deferring the pre-2011 benefits, while you gain roughly 10% on the post-2011 benefits. Unless you joined just a few years before 2011 this is unlikely to be positive until you're very old.

If you still want to do this, you could look at flexible retirement, drop to a minimal 20% FTE and take 20% of benefits now and fully retire at 62 ?

MarlowMallard

Re the above: "You only qualify for not having your pre 2011 benefits from being actuarily reduced if you are still employed by the USS employer at the time you retire and take your pension"

I read the small print a while back, and it's definite that you only qualify for un-reduced pre-Oct-2011 benefits if you are still an active member of USS (i.e. employed), and over age 60, and have employer consent to early retirement when you retire. Whether you have to put the pension into payment at the same time is not quite so clear.

As above you could look at flexi-retirement as an intermediate option if you really want to start the pension at 62. You could take 20% now and 80% at 62, but I think you cannot split years e.g. take pre-2011 now and post-2011 later on; you can only take a percentage of everything.

Finally, if you do just retire now and defer the pension to 62, as I understand it the pre-2011 part will be actuarially reduced before age 63.5 not 65, so if most of your pension is post-2011 that may be a reasonable option. The post-2011 is actuarially reduced from state pension age as it was in the year you accrued, so part 65 and part 66.

guymo

Glad it's not just me who is unclear on whether the pension must be put into payment on retirement in order for the unreduced benefits to be available.

I was aware that the employer has to give consent for benefits to be paid unreduced . The scheme rules also say "such consent not to be unreasonably withheld" so I guess that the consent is normally given. It's interesting to learn that you get that in writing!

I agree that it is probably not worth deferring the benefits after retiring at 60. My back-of-the-envelope reasoning is: if we imagine that the actuarial reductions are neutral given life expenctancy etc. then the chance to take benefits unreduced 3.5 years early is a big bonus (something like a 19% uplift on about half of the pension in my case) and the value of this bonus diminishes as you defer taking the benefits. Still, I'd prefer to move from "probably not worth it" to knowing exactly the situation. The plan would be to take advantage of a year or two without DB benefits in payment to draw from a SIPP without paying higher rate tax so I want to make some calculations and don't have the right information as yet.

USS replied by the way, but missed the point of my question so I will follow up.