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

davidr1964

I got a quote for my Classic WPS refund in 2019. There was no mention of tax, but there was a 'premium' reduction of approx 21% in case I was to marry after retirement and left a surviving spouse.

Shabbycat

davidr1964 - Thank you, that gives me an idea what to expect.

michaels

Shabbycat said:

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

I don't know why people are so frightened of the 'actuarial reduction' it is not that the greedy govt are trying to cash in on people's impatience to get their pension, it is just that you get the same money spread over more years.  In your case your income will go up at SP age and you would probably rather have a more constant income over the pre and post SP age periods.  Thus bringing forward some of your DB pension from after SPA to before sounds like a no-brainer to me.

Apologies if I am not explaining this clearly.

Consider a simplified example, you want to retire at 60 but don't get either your DB pension nor your state pension to 67.  Your DB pension will fro example pay an inflation adjusted 20k for on average 20 years post 67 = 400k (life expenctancy 87).  Instead you can have an actuarial reduced 14.8k every year from age 60 for an average of 27 years = 400k.  If you do this you shift 7 years times 14.8k = £103.7 of your DB from post 67 to the years between 60 and 67.  This then helps you balance the 60-67 period with the 67+ period.
No early pension you have £0 per year 60 to 67 and then £29.5k post 67 (DB plus state pensions), with reduction you have £14.8k per year pre SP and £24.3 post 67.  Assuming the £24.3 is enough then you have a much smaller gap to bridge in the 60-67 period.

Hope this is at least slightly clear.

Scrounger

Shabbycat said:

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.

http://forums.moneysavingexpert.com/discussion/5112135/wps-refund-tax

http://forums.moneysavingexpert.com/discussion/comment/66921922#Comment_66921922

http://webarchive.nationalarchives.gov.uk/ukgwa/20140305122816/http://www.civilservice.gov.uk/wp-content/uploads/2011/09/3_5_tcm6-1528.pdf

Scrounger

Shabbycat

Michaels - Thanks for the detailed explanation. I worked out some rough figured this morning, if I can hang on til the end of February, save at the rate I have been, max out my SIPP contributions, I can have a monthly net income of £2350 from March 23 until I pop my clogs. That’s not using any of my lump sum and not including Alpha which will be minimal.
If things go wrong I’ll take the actuarial reduction, as you say, it’s just shifting money forward. 

Thanks.

GunJack

michaels said:

Shabbycat said:

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

I don't know why people are so frightened of the 'actuarial reduction' it is not that the greedy govt are trying to cash in on people's impatience to get their pension, it is just that you get the same money spread over more years.  In your case your income will go up at SP age and you would probably rather have a more constant income over the pre and post SP age periods.  Thus bringing forward some of your DB pension from after SPA to before sounds like a no-brainer to me.

Apologies if I am not explaining this clearly.

Consider a simplified example, you want to retire at 60 but don't get either your DB pension nor your state pension to 67.  Your DB pension will fro example pay an inflation adjusted 20k for on average 20 years post 67 = 400k (life expenctancy 87).  Instead you can have an actuarial reduced 14.8k every year from age 60 for an average of 27 years = 400k.  If you do this you shift 7 years times 14.8k = £103.7 of your DB from post 67 to the years between 60 and 67.  This then helps you balance the 60-67 period with the 67+ period.
No early pension you have £0 per year 60 to 67 and then £29.5k post 67 (DB plus state pensions), with reduction you have £14.8k per year pre SP and £24.3 post 67.  Assuming the £24.3 is enough then you have a much smaller gap to bridge in the 60-67 period.

Hope this is at least slightly clear.

The problem with that is the reduced income may not be enough to live on, especially with going early you've accrued a lower amount to date than would be expected at NRA. So you've got actuarial reduction from a lower starting point. I suspect most in the CS/LGPS couldn't take the double-whammy and still have enough to live on (especially when you consider that average CS pension is only around £7k or so a year, and the majority of CS/LGPS members won't have been earning enough to stack a SIPP as well...

horsewithnoname

The wps deduction is not a set percentage. I had about 15% deducted from mine, a friend of mine had 30%. We are both still trying to get their calculations but it’s worse than pulling teeth. 

michaels

GunJack said:

michaels said:

Shabbycat said:

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

I don't know why people are so frightened of the 'actuarial reduction' it is not that the greedy govt are trying to cash in on people's impatience to get their pension, it is just that you get the same money spread over more years.  In your case your income will go up at SP age and you would probably rather have a more constant income over the pre and post SP age periods.  Thus bringing forward some of your DB pension from after SPA to before sounds like a no-brainer to me.

Apologies if I am not explaining this clearly.

Consider a simplified example, you want to retire at 60 but don't get either your DB pension nor your state pension to 67.  Your DB pension will fro example pay an inflation adjusted 20k for on average 20 years post 67 = 400k (life expenctancy 87).  Instead you can have an actuarial reduced 14.8k every year from age 60 for an average of 27 years = 400k.  If you do this you shift 7 years times 14.8k = £103.7 of your DB from post 67 to the years between 60 and 67.  This then helps you balance the 60-67 period with the 67+ period.
No early pension you have £0 per year 60 to 67 and then £29.5k post 67 (DB plus state pensions), with reduction you have £14.8k per year pre SP and £24.3 post 67.  Assuming the £24.3 is enough then you have a much smaller gap to bridge in the 60-67 period.

Hope this is at least slightly clear.

The problem with that is the reduced income may not be enough to live on, especially with going early you've accrued a lower amount to date than would be expected at NRA. So you've got actuarial reduction from a lower starting point. I suspect most in the CS/LGPS couldn't take the double-whammy and still have enough to live on (especially when you consider that average CS pension is only around £7k or so a year, and the majority of CS/LGPS members won't have been earning enough to stack a SIPP as well...

True but I think we were discussing a situation where the person felt they probably had enough to retire early.

Obviously issues like career average vs final salary can potentially make a big difference if deciding to retire early. 

Shabbycat

horsewithnoname said:

The wps deduction is not a set percentage. I had about 15% deducted from mine, a friend of mine had 30%. We are both still trying to get their calculations but it’s worse than pulling teeth. 

Oh, so I’m none the wiser then. I think I should just assume there won’t be much left for me after everyone else has taken a slice of it.
If I were to ask for a pension forecast after October 23, would this include the WPS calculations or would I have to wait til 60??? Thsnks