Three years post retirement ... how the finances are going

marlot

I retired three years ago @ 55.  A few thoughts on how it's gone may help others who are thinking about it.

I'd been saving hard for retirement since my early 40s.  Putting 50% of my gross salary into pensions.  That was derailed a little when I was made redundant at 48. Fortunately, I landed a civil service role (much lower salary, but very decent DB pension [Nuvos then Alpha]).

• I took my DB pensions early.  Two at 55, one at 56.  Mostly to help me stay below the LTA threshold.
• I also crystallised my SIPP at 55.

What worked well:

• I just scraped below the LTA threshold.
• There was an error calculating one of my DBs, and I received a 5% boost a year after it went into payment.  Fortunately, the trustees and HMRC reached an understanding, so the additional pension wasn't subject to an LTA test.
• The markets have performed very well.  I didn't panic when covid struck, and stayed invested.
• Setting up a self employed business to get class 2 NI topups was fairly easy.  But the self assessment tax return needs to be done each year.
• I'm pleased I crystallised the entire SIPP - I've hugely benefitted from the rise in the markets.

Negatives:

• One of my DB pensions pays a small uplift from 60 to 67.  Although in payment for just seven years, it is still multiplied by 20 for LTA purposes.
• My AVC was transferred to HL as crystallised when it should have been uncrystallised.  Fortunately HL and the AVC organisation sorted it out.  HL in particular were very helpful.

What I wish I'd known:

• The 'small pots' rule - this would have given me a little more flexibility.
• It can take several months to get a DB pension into payment.  Their admin can be very slow.

Still to do:

• I still don't understand the impact that GMP will make to the DB pension that it affects.  Not even whether my monthly payment will rise or fall at 67.
• I'm still dripping the tax free cash from my DC into ISAs.  In the meantime it's in a general investment account - but I have to watch for/manage capital gains each year.
• My SIPP is with HL.  I'm aware they are expensive, but I've received good service (though I'd have appreciated them alerting me to the small pots).  I may change to somewhere cheaper in due course.
• I'm mostly invested in trackers.  That's probably a bit cautious.  The IFAs I met didn't inspire me.

Final thoughts:

• I am very fortunate to have DB pensions.  The combination of DB and DC gives me stability and flexibility.
• It is wonderful receiving payments every month from the DB schemes.  Even from the company that made me redundant!  Somewhere deep down, I have the irrational fear of one of them sacking me and the payments stopping!
• I'm still struggling to switch from being a saver to being a spender.

marlot

Forgot to say ...

>> One of my DB pensions pays a small uplift from 60 to 67
I asked if it was possible to not take this uplift.  Or whether the trustees could give it to charity instead of to me.  Was told not allowed under the scheme rules.  The rules were obviously written before LTA became an issue.

Flugelhorn

marlot said:

What worked well:

• I just scraped below the LTA threshold.
• There was an error calculating one of my DBs, and I received a 5% boost a year after it went into payment.  Fortunately, the trustees and HMRC reached an understanding, so the additional pension wasn't subject to an LTA test.
• 
  

Ho ho me too - was delighted that in the absence of proper figures I guessed correctly  how much lump sum to take and ended up 99.1% LTA ... fine until there was some recalculation and adding in delayed payments, woops over it went, not that it seems to make much difference in the end 

tacpot12

Thanks for the insight. I'm in a similar boat, but investing with AJ Bell. I've not drawn on either of my two small DB pensions but will be looking forward to the regular income when I do. I've noted your observation that it can take a long time for the schemes to start paying the pensions once you ask for it. The world of pensions seems to move at a slower pace that other areas of life. 

Hope you are enjoying your retirement. 

BritishInvestor

"I'm mostly invested in trackers.  That's probably a bit cautious. "

Don't understand this bit. You can vary your risk levels with trackers by mixing and matching surely?

jim8888

Thanks for the update from real life (as opposed to spreadsheet projections!)  I'm in a similar situation, having both a DC and DB pension and crossing the border of the LTA. I don't know if I should take the DB pension now - it would pay me £18k per year, no lump sum - or leave it until it matures at 65, when it will pay £30k a year. I can live off the DC pension until then. My thinking on this is that the DB at 65 will give me real security, financially, for old age while the DC, which is quite a substantial pot at £800k, is vulnerable to market fluctuations. I haven't decided the best route yet and have set myself a deadline of the new tax year to tackle the "problem". 

DT2001

GMP 
Do you have the figures from when you left the scheme?
The increases in the amount vary depending on when you left and the method adopted by ‘your’ scheme.
Xylophone, who is a whizz at all things GMP, will assist in your understanding or correct any misinformation I give you.
Any GMP payments will be from 65 (male). You might get an increase in payments again depends on scheme rules. It will affect increases thereafter as each element of your pension is treated differently (mine will have part increased by RPI max 5%, part CPI max 3%, part no increase - I have GMP accrued pre and post 1988).
At 67 my pension reduces as there is a SPA adjustment - not common but again scheme rules vary.

Thank you for your insight to retirement. whilst I am still working I have taken my DB pension from the employer that made me redundant 25 years ago and am enjoying the payments coming in  every month.

Albermarle

• It can take several months to get a DB pension into payment.  Their admin can be very slow.

I can very much agree with this statement ! First applied in April , first payment arrived end of September . Then only after getting ex employer involved to push things along and them raising an official complaint on my behalf. 
Even now there is still some lack of clarity whether it should be being paid in arrears or in advance .

I'm mostly invested in trackers.  That's probably a bit cautious. 
Presume they are not all stock market index trackers ? as I would not call that cautious if they were.

NoMore

re: the small uplift in DB pension, what does it matter if it breaks the LTA ? I would understand if it was a large amount you were going to be above but it seems like you may just cross it a little bit. So what! you'll pay a bit extra tax but you still end up with more money.

Flugelhorn

NoMore said:

re: the small uplift in DB pension, what does it matter if it breaks the LTA ? I would understand if it was a large amount you were going to be above but it seems like you may just cross it a little bit. So what! you'll pay a bit extra tax but you still end up with more money.

I felt a bit like that and was a bit cross when I suddenly seemed to have a 101% LTA - but I still had 3K extra in my bank account which was a pleasant surprise and the small amount of tax is sorted before the monthly payment comes to me. Problem comes with trying to do something with the DC pot when it will be a lot of extra tax. 

marlot

NoMore said:

re: the small uplift in DB pension, what does it matter if it breaks the LTA ? I would understand if it was a large amount you were going to be above but it seems like you may just cross it a little bit. So what! you'll pay a bit extra tax but you still end up with more money.

I know it's only a relatively small amount, but I'm not sure that's always true.  I think it depends on your tax rate and how the pension scheme handles the excess charge.

If we say the uplift is £500.  My gain is £500 less tax for seven years.

If we assume 20% tax that is a net income of (£500 - 20%) * 7 years = £2800.
If we assume 40% tax, that is a net income of (£500 - 40%) * 7 years.  = £2100.

As it's above the LTA, then the assessed value is £500 * 20 = £10,000.  The 25% LTA charge on that is £2,500.

I know it's only a small amount, but you can understand why I'd rather forfeit the money.