USS - General discussion

ussdave

FIREmenow said:

Hi All,
Thanks for the really helpful discussion on taking the DC part of the USS pension tax free, and the handy Excel formula, which has replaced my round-the-houses way of working it out in my spreadsheets.

Can anyone tell me how actuarial reduction impacts this calculation (if at all)? Is it still the same calculation using the reduced DB annual amount and lump sum?  Is the reduced annual amount still only multiplied by 20?  I'm playing with the new benefits calculator and don't want to make an error.

Many thanks and Happy New Year

In terms of the amount of DC you can draw tax free you're right with your assumption - you just use the reduced figures for your RB benefits to calculate the maximum amount.

PJM_62

bluenose1 said:

PJM_62 said:

bluenose1 said:

.. with the inflation rise and the extra £215 x 3 for the pension, I am better off not taking it until April 24 as my lump sum increases more than the pension payments I would have received.. 

Can you explain a bit more about this.

By not starting my pension until 1st April 24 my pension and lump sum will be based on the increase awarded for inflation, which I think will be just under 6%. 

There is also a one off additional award of £250 for all current and deferred  members who paid into the scheme between a certain date to compensate for the prior reduction in benefits, which means if I don’t take my pension until 1st April 24 my lump sum will also be increased by an additional £215 x 3.

I will actually be financially better off starting my pension in April 24 rather than January 24 as the increased lump sum will be more than the 3 months pension foregone. 

The above is all my understanding, not yet confirmed by USS. 

Do you know about the changes to early retirement factors that are happening from after 1Apr24.

https://www.uss.co.uk/for-members/calculate-your-benefits/factors-used-by-uss

I think it means an increase in the pension reduction from about 3.5% to closer to 5% , per year.

For me, doing an early retirement flex, taking 80% of pension, sees my quote drop from about 8200 to 7700 overnight on 31March24.  And thats with the uplift included in the 7700.     

Simes122

Oh my, this is not good - looks like I might have to bring forward my retirement to end March.  So much for going just beyond April for the lump sum catchup!  With this change, they've eradicated any benefit of waiting.

swindiff

A cynic might say, maybe that was the plan.

Simes122

swindiff said:

A cynic might say, maybe that was the plan.

I'm trying to weigh up impacts of the change.  I'm on the cusp of retirement - was scheduled for 30 Apr 24 (to get the £215x3 LS improvement).  However, the factor changes impact my annual pension by -5.8% for life, and my RBLS by -4.78% as I'd intended on commuting pension to LS;  that's if I go on 30 Apr 24, vs 31 Mar 24.   If I go early, I forgo the £215x3 LS, but the ERF and Commutation factors kill the reason for staying for that.  

But that's weighed up also against another month's earnings.  But my rough calcs make it look like I'd be working for negative benefit overall.  ie working for nothing for that extra month - indeed it looks like it would cost me money over the long term.

Sneaky gits!

MPLMPL

I'm planning to go at the end of September, but can't bring it forward as I'm not 55 until the summer. Even if I was 55 now, I have to give 3 months notice, so still wouldn't be able to get in before 1st April before ERFs change. I assume many planning to retire this summer are in the same boat re notice period. Massive spanner in the works.

Simes122

MPLMPL said:

I'm planning to go at the end of September, but can't bring it forward as I'm not 55 until the summer. Even if I was 55 now, I have to give 3 months notice, so still wouldn't be able to get in before 1st April before ERFs change. I assume many planning to retire this summer are in the same boat re notice period. Massive spanner in the works.

The ERF and Commutation Factor changes are an insidious and stealth detriment to the USS pension terms.   I guess on the upside, your contribution rates have gone down - it's just that this saving will have been more than eradicated by the ERF and CF changes in all likelihood, albeit it starts to depend on personal circumstances a lot.  Are you retiring early, how early, are you planning on converting pension into LS etc or LS into pension (where the factors have improved) etc.  I'm going on 31 March now I think rather than 30 April - the extra month earnings, plus Restoration of Benefits catch up LS aren't enough to exceed the longer term detriment to pension overall if I wait rather than go early.   I feel like I've been pushed!

Beckster1964

Simes122 said:

MPLMPL said:

I'm planning to go at the end of September, but can't bring it forward as I'm not 55 until the summer. Even if I was 55 now, I have to give 3 months notice, so still wouldn't be able to get in before 1st April before ERFs change. I assume many planning to retire this summer are in the same boat re notice period. Massive spanner in the works.

The ERF and Commutation Factor changes are an insidious and stealth detriment to the USS pension terms.   I guess on the upside, your contribution rates have gone down - it's just that this saving will have been more than eradicated by the ERF and CF changes in all likelihood, albeit it starts to depend on personal circumstances a lot.  Are you retiring early, how early, are you planning on converting pension into LS etc or LS into pension (where the factors have improved) etc.  I'm going on 31 March now I think rather than 30 April - the extra month earnings, plus Restoration of Benefits catch up LS aren't enough to exceed the longer term detriment to pension overall if I wait rather than go early.   I feel like I've been pushed!

I’m in the same boat, was planning to draw pension July 2024, but now moved it to Feb 2024 to avoid this change. After spending a long time planning out my pension and waiting until the USS modeller had been debugged, now feel very rushed into this by USS.

Simes122

It's all very last minute - but I think previous factor changes have been rolled out fairly quietly too.   It's just compounded this year by the restoration of benefits noise, which people have planned their lives around!   ie, you only get the £215x3 lump sum if you are working on 1 April.   So all of us who have made life decisions based on that one bit of info have been led into that trap and now find themselves snared by the detrimental revised factors - not really on in my view.  That said, even though I won't get the lump sum, the restored benefits are slightly higher for retired members, so actuarily I'm probably no worse off if I live 30 years....

Simes122

I have raised a complaint to USS over this.  I think the way it has been messaged is appalling.  We have been given sufficient information to inform lifestyle and retirement decisions on the one hand with the restoration of benefits positive messaging; however, we have not received any messaging re the factor changes that might have otherwise informed our retirement decisions.  There will be many people I'm sure who have deferred their retirement or pensions beyond 1 April to benefit from the £645 additional lump sum, without any awareness, that the £645 might cost them dearly if they stayed long enough to claim it.   

I don't know what good it will do - I know my departing earlier now will cause some operational difficulties at work, I'll have less earnings as a result, but am pretty annoyed about the way this change has come about and the timings suck given the earlier messaging about when and how you'd be eligible for the restoration of benefits.