TFLS Commutation Rates & retirement planning Questions

[Deleted User]

Hi everyone

Long post, sorry.....

I reach milestone of 55 years in October 2022 and am allowing myself to contemplate either moving to  part time working for a final 2 years till full retirement.  Or may stay on full-time.

I was quite happily not going to take a TFLS at 55 from my LandRover DB scheme because I don't need the cash (see below re my position).  However,  the commutation rate drops by 0.25 for every year onwards to 65 (LRDB default retirement age) and this has really confused my decision because, possibly stupidly, I think I'd be losing out if I deferred taking it out??  But I'm thinking drip feeding into ISA would be sensible for variety of reasons (better ISA/pension balance,  take money now from DB pension in case hit by bus at 66 etc,  possible pension lifetime allowance issues....albeit forecast  onward growth not likely to mean I have that problem)

Comm rates quoted: 55 = 16.50....65 = 14.00 

So the calculations provided by Mercer LR pension admins are:

TFLS = Ann pension / (3/20 + 1/comm factor)

Residual pension = orig Ann pension - (lump sum comm factor)

So using above I calculated:
Age 55, TFLS c£67k, £10k res pension at age 65
Age 60, TFLS c£65k, £9.7k res pension at age (albeit annual rises at least CPI to be added

Considerations
- I need to draft my retirement budget and income glidepath but as is apparent I'm low maintenance/enjoy a quiet low key life
- inheritance tax bill (I may have no obv dependents but would prefer charities friends/children to benefit rather than HM Treasury)
- pension lifetime allowance but now onward growth is expected to be low for next 10 years....don't see this as problem


My position
Reach age 55 in October 2022
Single, no children, no siblings
Currently employed in perm role fulltime 35 hrs per week
- work from home 80%
- commute is 3 miles each way
Ann salary £45k plus £9k bonus (payable April)
- Employer makes 12% SS cont to DC Pension
- I make 8% by SSacrifice cont to DC Pension
- I make monthly max AVC c £1800 & also annual bonus by SS cont to DC Pension
- I do annual pension top up split to SIPP & Employer equivalent nett £10k to get basic payer tax relief
No debt
My Own property (bungalow) no mortgage, c£400k
Rental Property, no mortgage, c£450k, month rent £1700
Full state pension at age 66 (full contribution years made every year since age 16)
Sipp £350k (mainly vanguard lifestyle 80% equity  but also fidelity uk accumulation and an hsbc 70%  equities fund.........so when market recovers im going to de risk)
Current Employer DC £330k (plan to move to SIPP at retirement so I can take flex access drawdown)
LR DB £14k per year at 65 (as of May 2022)
LR AVC £12k pot inc final bonus (at 65)
SS ISA  £180k   (SIPP & SS ISA on II Platform)
Cash ISAs £65k (should be thinking of moving 50% to SS Isa? ?)
Prem Bonds £25k
Various cash/current accounts £8k
Inheritance possible (never taken for granted) £200k
No financial advisor being used.

Retirement glidepath being worked out but I can't see that I'd need annual income more than £27k....anything more would be luxury to me.

QUESTIONS

Why does comm factor of LRDB drop each year?

Does taking TFLS at 55 seem right for me?

Any other options for TFLS than drip feeding TFLS into SS ISA (no, don't need a TESLA)

What risk level for my SIpp pension and ss isa would be appropriate for post retirement given my position.....opinions being sought here

Am I holding too much in "cash" or should I face reality that I'm nearly 55 and should be moving a portion of assets into no/low risk?

Do ww agree that i can afford to retire in April 2025 post my 57th birthday (I want one last bonus from work lol......or even better redundancy as well lol)

Is there anything else that I should be thinking about that I have not mentioned?

Thank you if you have not lost will to live after all of that

xylophone

Full state pension at age 66 (full contribution years made every year since age 16)

Have you checked your State Pension Forecast?

https://www.gov.uk/check-state-pension

What exactly does it say?

I have read through your post but am still unclear as to your plan.

Is it to take your deferred  DB Land Rover Scheme pension at age 55 without lump sum?

This would be ten years before Scheme NRA so this would be with actuarial reduction?

You would then continue to work (either full or part time) in your current employment up to age 57 and then fully retire and start drawing on your DC pension?

With regard to your general position, would you wish to take professional advice at some point?

https://adviserbook.co.uk/

You would tick "confirmed independent" and such other specialisms as you require.

hyperhypo

Copy Xylophone's comments on having plan, given you have significant dB DC and cash to support some means of stopping work prior to NRA at 65, should you choose to do so. 
The commutation rates you quote would appear....at x14 to x16....at the lower end of scale for private funded dB schemes...x20 to x25t might be more typical....some much higher too. It's normal for this cash sum to decline as NRA approaches in most if not all dB schemes. Knowing actuarial reductions... perhaps expressed as %...in each year preceding NRA would be useful to know...your scheme admins will likely have a table quoting these values.
Also find out what inflation protection in place.eg RPI or CPI %for your scheme.

On face of it it would appear prudent to forego any pcls cash at any age, particularly as you have other cash assets and no stated need for such..
Good luck in figuring out how and when you wish to use your very flexible set of assets. 
Disclosure... I've just taken half of my cash lump...to boost my cash fund so as not to sell other assets at present or until 3years until SP starts. I was foregoing good inflation protection...10%RPI set against a commutation of X23. I felt I had to justify doing so though...

[Deleted User]

xylophone said:

Full state pension at age 66 (full contribution years made every year since age 16)

Have you checked your State Pension Forecast?

https://www.gov.uk/check-state-pension

What exactly does it say?

I have read through your post but am still unclear as to your plan.

Is it to take your deferred  DB Land Rover Scheme pension at age 55 without lump sum?

This would be ten years before Scheme NRA so this would be with actuarial reduction?

You would then continue to work (either full or part time) in your current employment up to age 57 and then fully retire and start drawing on your DC pension?

With regard to your general position, would you wish to take professional advice at some point?

https://adviserbook.co.uk/

You would tick "confirmed independent" and such other specialisms as you require.

Sorry, for belated reply.

Yes , I had checked State Pension ( I do every June) & as of June 2022, I  have already earned the full SP (1983/4 to 2021/2 = 39 years) - as of now, £185..15 per week.



THANK YOU  

Dazed_and_C0nfused

Yes , I had checked State Pension ( I do every June) & as of June 2022, I have already earned the full SP (1983/4 to 2021/2 = 39 years)

You are under transitional rules so having 39 years is irrelevant.

You may have reached the standard new State Pension amount but 39 years doesn't guarantee it.

What is the monetary amount you have accrued at 5 April 2022?

This is usually shown after the headline forecast figure.

L9XSS

Isn’t your state pension age (67) you mention payable at (66)..........your 55 in October 2022?

af1963

On your IHT comment:
- inheritance tax bill (I may have no obv dependents but would prefer charities friends/children to benefit rather than HM Treasury)

Anything you leave to charities will be IHT free anyway . And if you leave a large enough amount to charities, the tax rate payable on the rest of the estate is also reduced.  Plus, anything in your SIPP / DC pensions is excluded from the estate.( all according to current rules, which could change.)

[Deleted User]

Dazed_and_C0nfused said:

Yes , I had checked State Pension ( I do every June) & as of June 2022, I have already earned the full SP (1983/4 to 2021/2 = 39 years)

You are under transitional rules so having 39 years is irrelevant.

You may have reached the standard new State Pension amount but 39 years doesn't guarantee it.

What is the monetary amount you have accrued at 5 April 2022?

This is usually shown after the headline forecast figure.

Hi, Just checked again:-

Govt Gateway June 2022:-

Your forecast (of £185.15)

• is not a guarantee and is based on the current law
• is based on your National Insurance record up to 5 April 2022
• does not include any increase due to inflation

[Deleted User]

L9XSS said:

Isn’t your state pension age (67) you mention payable at (66)..........your 55 in October 2022?

Sorry, typo, just corrected it to (sadly) 67!!!