Classic/Alpha - Sipp/ISA - Time to go??

Shabbycat

Hi,

My position:-

56 years old
Mortgage free, no kids.
31 years in LGPS - still employed but now with reduced hours so no longer in 40% tax bracket.
I need one more year of contributions for a full SP. Yes, I have read and understood the full forecast.
I worked out my NUMBER a couple of years ago at £15k but think £18k is more realistic now.

SIPP - £51K split between VLS100 and VLS40 and £7k cash
ISA - £26K split between VLS100 and FTSE Dev World ex UK.
All are with Vanguard in accumulation funds.
£49k in cash savings/premium bonds.

Classic -  £17, 759pa and Alpha £7472pa as of 31/3/21. I would expect to add another £1,050  to Alpha for last year. My best 12 months were between May 20 and May 21, I won't ever exceed my earnings in that period.

Plan is to leave work later this year, withdraw maximum amount tax free from SIPP each year til I'll 60 and then start taking my work pension at 60 without any reduction.
It is my understanding that my pension will revert to the legacy scheme for the remedy period and then when I take my pension I choose whether I want to opt for the legacy or reform scheme for the remedy period. I am likely to choose Classic (legacy) . Does anybody know if I will owe contributions or the scheme will owe me?? I've read the relevant part of the consultation paper but am still not clear.

I don't want to accumulate more cash now, should I add to the ISA or the SIPP? - I won't be taking the tax free lump sum in one go. Once I am living off my SIPP/ISA funds should I stay in accumulation funds or switch to income funds? What are the advantages/ disadvantages of either option??

I've already done 'one more year' and really expected to leave at the end of last month but am still not 100% sure. I've really had enough though so it wouldn't take very much to tip the balance.

Any thoughts on any of the above? Thanks for your time.

Dazed_and_C0nfused

Does anybody know if I will owe contributions or the scheme will owe me?

Neither.  Contributions were the same in each scheme.

I don't want to accumulate more cash now, should I add to the ISA or the SIPP?

For a basic rate payer now and in retirement the SIPP has a 6.25% headstart on the ISA (25% added to your contribution now and only 75% of the gross is then taxable).

Secret2ndAccount

Yes, keep paying into the SIPP. It's not so much about acc or inc funds. Your current choices are sensible, and no need to change. The big benefit comes in the tax rebate. Pay in 2880 and you get a 720 top-up from the taxman. It's possible you can empty the SIPP before age 60 and not pay any tax at all, so the 720/yr is free money. As this is a short term plan, you could opt to leave the 3600 each year in cash so that it isn't exposed to the vagaries of the stock market. That's up to you.
That's plan A; you can do the 2880->3600 thing every year, even after you stop earning.
But here's plan B, which is better:
In your last year of work, you could live off your savings and pay your salary into the SIPP. Suppose you work six months this year (starting April 6th) and earn 18k. So you pay what? 1k into your CS pension? Pay 12k into the SIPP, and the taxman tops it up to 15k. Your total pension contribs (from you, not your employer)  can't be more than you earn, though the tax relief can be more than the tax you paid        Now you are probably looking at paying a bit of tax by the time you've got all the money out of the SIPP, but you still get 25% tax free, so you always end up better off.

Inc or Acc funds doesn't really matter inside a SIPP. The Acc funds reinvest your dividends so I prefer those. If you have inc funds you will gradually build up cash in the account. Periodically go in and invest the cash as you see appropriate.
When you want to take money out of the SIPP, you will need to sell some of your holdings to create a sufficient cash pile for the withdrawal. Unlikely that the income from the inc funds will be enough to create the entire cash sum for a large withdrawal.

Albermarle

As above, I would not normally worry about INC or ACC funds in a SIPP.

One exception could be is to have one INC fund just to keep the cash account topped up to pay the platform fees.
Otherwise platforms just sell a small part one of your investments for you to generate enough cash to pay the platform fee. The problem can be is that a couple of platforms charge for doing this ( A J Bell for one ) .

Shabbycat

Thank you all for your replies.
I’m glad I’m not going to owe any contributions which was my main concern. 

I’ll top up my SIPP each month til I leave until I reach my years earnings and leave it in the accumulation funds. My platform fees are paid from my current account by DD so not a problem.

Silvertabby

You say that you are in the LGPS, but then go on to talk about your Classic and Alpha benefits, which are Civil Service pensions.

If you do mean that you are in the CSPS rather than the LGPS, then you may well have protected rights to take unreduced benefits from 60.  But if you are LGPS then only your pre 2008 accrual will be protected, and your later accruals will be reduced for early payment.  This is the LGPS R85, in which the changes date back to 2006 and so are unaffected by McCloud.

michaels

Seems to me you have too much income post 67 when you have your two pensions plus state pension (35k?) and would be better to shift some of that earlier to balance things out so I would say possibly take the two DB pensions now with the actuarial reduction (approx 15%)  and top up until 67 with the savings at 10k pa.

This gives you 32k pa constant pretty much from today staying the same post SP age when SP replaces your savings.

Hope this makes sense.

Shabbycat

michaels - The pension figures I quoted are as my pension stands at the moment but with the McLoud judgement I'm going to opt to take the remedy period as Classic which will I think give me a pension of £22,500 from 60 without any reduction. My Alpha pension at 67 will be only a few hundred. It's tricky to work out my reckonable service as I've had a couple of periods of working flexi hours in the last five years. If I use the SIPP plus savings til I'm 60 I'm hoping to avoid actuarial reduction unless I have too.
Silvertabby - Yep, getting my terminology wrong, I'm in the CSPS Clas sic/Alpha. I don't know much about R85 at all so don't know if it would apply to me. 
One further question, as I have never married I understand I get the widow(er)s portion of my contributions back, taxed at 40% and with a one off admin fee. Is the admin fee a fixed amount or a %, are we talking hundreds or thousands/ 2% or 20%???
 I don't think it's worth asking for a pension forcast until after Oct 23. 

Thanks

Dazed_and_C0nfused

One further question, as I have never married I understand I get the widow(er)s portion of my contributions back, taxed at 40% and with a one off admin fee. Is the admin fee a fixed amount or a %, are we talking hundreds or thousands/ 2% or 20%???

Where have you read that this payment is taxed and incurs an admin fee?

https://www.civilservicepensionscheme.org.uk/knowledge-centre/pension-schemes/classic-scheme-guide/finding-out-more/

Silvertabby

Shabbycat said:

Silvertabby - Yep, getting my terminology wrong, I'm in the CSPS Clas sic/Alpha. I don't know much about R85 at all so don't know if it would apply to me. 

Forget R85 - it's purely a LGPS thing.  Your CSPS Classic unreduced from age 60 is a much more generous deal.  

Shabbycat

Silver tabby - Thank you
Dazed and Confused - It says a deduction of a single non refundable payment in case you marry after retirement.?? Just trying to get an idea of what I can expect to have deducted.
I’m pretty sure it was within this forum that I read that as it was classed as a special payment so taxed at 40%. I’ve probably got the terminology wrong again. I seem to remember there was quite a discussion about it.