USS pension advice needed -take maximum lump sum or leave invested?

gumgirl

Hi,

I am wanting some advice on my USS pension if possible. I have read a lot of the posts on here re USS and looked at the USS website many times to help me. But I am still unsure what to do. 

I am wanting to retire soon and am in my early 60s. I have about £460,000 in my pension pot. If I take my maximum tax free lump sum I will get around 115k and a final salary pension of about 24k a year. I currently have about 100k in the investment builder.

I know from reading other posts that it is now more beneficial -with the commutation factors- to take cash rather than translate that cash into extra pension. I am ok with 24k a year until the state pension kicks in, and would like to take the maximum cash sum that I can. As thinking longer term, I want to be able to leave it to my only child, given when I die my pension can't be passed to a spouse as I am not married, and my child is not a dependant.

But my dilemma is whether to take the 115k as a cash sum and invest it (I don't need it to pay off a mortgage etc) but I realise savings accounts return little currently, so I would think about investing some of it in stocks and shares, some in an ISA etc. Or if I should leave the 100k in the investment builder and take out sums when needed with the first 25% tax free, so it is earning money whilst in there.  And I believe if I die before I am 75 it is not subject to Inheritance Tax. (However, I do have some worries about the long term viability of USS given the current problems and arguable valuations.)

I have tried to do as much homework as I can, but with maths not my strong suit, if anyone has any views or advice on what could be the best option for me, I would really appreciate it. Thank you.

Dazed_and_C0nfused

I am wanting to retire soon and am in my early 60s. I have about £460,000 in my pension pot. If I take my maximum tax free lump sum I will get around 115k and a final salary pension of about 24k a year. I currently have about 100k in the investment builder.

Can you clarify this as I'm not sure you can have a pension pot of £460,000 AND a final salary pension for the exact same pension.

A final salary pension and separate investment builder yes but not not quite how you describe things.

A final salary pension means there is no pot, you simply get a guaranteed pension for the rest of your life.

gumgirl

Ah, thanks for clarifying. In this case I have 100k in the investment builder and 24k a year in the final salary scheme. (I thought I had 460k in total in my pot assumed from the maximum 25 percent tax free lump sum of 115k, but I realise now that's misleading.)

Dazed_and_C0nfused

If you were to take PCLS of £115,000 as part of your final salary pension what impact would this have on the £24k figure?

And would this affect any survivor pension, sometimes it does but I think there are schemes where taking a PCLS doesn't reduce the survivor pension.

Do you have the option of taking a lesser PCLS, say £50k, and having a higher pension?

What inflation proofing do you get with the final salary pension?

gumgirl

Sorry if I did not make this clear- I would get both -24K a year plus the 115K. The 24k is unchanged.  I would have nothing left in the investment builder if I took both. 

I'm not sure what a survivor pension is- is this if I die and my child is my survivor?

Yes I can take more pension and not take any or take less lump sum but the USS recently changed the commutation factors and it is much more beneficial to take cash rather than more pension. But I don't want more pension in any case.

Here is the inflation info off the USS website-

USS standard pension increase

Your pension will be reviewed each April in line with our standard pension increases.

Any increases are linked to increases in official pensions paid to public sector employees (like teachers, civil servants or NHS employees). We’ll match the full increases for any USS benefits you earned before October 2011. For any benefits earned after that date we match these increases for the first 5% and pay 50% of any increase over 5%, up to a maximum increase of 10%.

So if official pensions increased by 3%, we would increase your pension by 3%. If they increased by 7%, we would increase your pre-October 2011 pension by 7% and post-October 2011 pension by 6%.