Taking DB pension early thoughts?

woodbine68

Hi everyone British Steel DB pension so no chance to transfer. So I am thinking of  taking it @55
Here goes @ 55 20k with no pcls with pcls - 5k reduction. pcls of £100k@55 do I take the pcls and pay mortgage of 70k off or put it into a fixed term annuity? Or not take it at all?
Or can I take it and put it into my wife's pension she earns 20k per year.
The pension figures from August and I was 54 then so no doubt there will be an increase in April of CPI plus the actuarial increase.
Also still working earning over 50k but salary sacrificing 20k per year.
Thanks in advance 

sheslookinhot

I don’t think I would take a pension so early as no doubt it will/may be subject to significant early retirement charges. If no early reductions applicable it may be worthwhile.

NoMore

Just because you can take it doesn’t mean you should. 

You should have a reason for it and should be considered against your overall situation and requirement in retirement. Your post only had hints of this but no real detail so nobody is really going to be able to give you any useful advice based on the currently supplied information. 

woodbine68

What extra details do you think I should add please
I am after some sound advice so I can post whatever is needed

Dazed_and_C0nfused

What is the NPA for the DB scheme?

Do you really need the PCLS?

Is your current pension totally separate to the British Steel one?

What do yo expect your P60 might show your taxable pay as for this tax year and next?

Do you have any other taxable income?

Marcon

woodbine68 said:

What extra details do you think I should add please
I am after some sound advice so I can post whatever is needed

Far more detail than it would be sensible to post on a public forum! If you are after sound advice, then paying for it is likely to be the most sensible course of action. You'll then be given advice based on a full understanding of your financial position, objectives, attitude to risk, etc. Random strangers may mean well, but they quite simply don't have enough information to offer really well informed comment.

NoMore

As welll as the above. When do you want to retire and how much income per year do you need during retirement. 

How much in savings and pension do you have in addition to this pension? 

Ideally you want to provide enough info so people can advise you on a comprehensive plan for how and when to access your pensions and savings to achieve your retirement aims. 

woodbine68

Thank you for this i was just after thoughts  I was going to pay for advice before I made the leap

woodbine68

Marcon NPA is 65 DC pension is totally separate from the Bs one  and there is 127k in it as of today P60 will say 62k
And no I don't need the PCLS really normal expenses on retiring circa £6kDazed_and_C0nfused said:

What is the NPA for the DB scheme?

Do you really need the PCLS?

Is your current pension totally separate to the British Steel one?

What do yo expect your P60 might show your taxable pay as for this tax year and next?

Do you have any other taxable income?

NPA is 65 DC pension is totally separate from the Bs one  and there is 127k in it as of today P60 will say 62k
 Next year 65k at least

No other taxable income

Albermarle

Giving up £5K pa of guaranteed income for a PCLS of £100K, gives a commutation factor of 20. 
This would be pretty typical for a pension taken at 65, but for a pension taken at 55 , it looks quite poor.
Assuming that the BS pension has some kind of inflation linking and that the average life expectancy at 55 is about 30 years, then it does not look great value to take the lump sum.

Secret2ndAccount

Woodbine, you are in a good position, and there isn’t a wrong answer here. For average Joe, taking the DB early doesn’t really cost you money, or benefit you: it just spreads the money out differently over the years. In your case, even if you take the DB at 55, your total (DB + State Pension) at 67 will be 30k/yr. That pays all the bills, and gives you a bit left over for spending money. You then have your entire DC pot for emergencies and special occasions. Currently you are on 45k (effectively) but paying a mortgage. If you leave the DB to 65, you will then, from age 67, be on 45k with no mortgage. Do you really need to have more disposable income at age 75 than you have now?  Of course, some people would answer “Yes, I plan to run the New York, Boston and Sydney marathons in one year to celebrate my 80th birthday”. Those people should leave the DB to age 65. Many people prefer to have a bit more spending money in their 50s/60s. If you are happy that you are properly provided for in your later years, then I think it’s great to start the DB early. You could make overpayments on the mortgage if you’d like to clear it up. No need to take the lump sum if you don’t have a very good reason to.

So really, it’s about life choices – the money will be fine. Do you want to retire?  Tomorrow?  Or at least before 67?  Do you want to be well off now, or do you want to be extra prepared to pay for gardeners and care homes later? How much do you need, and how much do you want?  What about inheritance? Decide on a plan, than bend the finances to meet your needs.

This is a very interesting case. I’m effectively recommending the OP to convert a DB pension into a DC pension. That’s the opposite of what many people would like to do. However, there are mitigating factors in this case:

1.      The OP is still well provided for – he still has a 30k of guaranteed income;

2.      Salary sacrifice means a 100% value for the increased income.

If he was to take the 20k, and increase his sal-sac by 10k, then he would see an extra 1200 in his pay packet, due to the NI saving. The other 10k would return 8k after tax, so the 20k returns a total of 19200 after tax. The DC pot:

1.      Can be inherited if he dies, unlike the DB which is lost (OP should check the terms of the Spouse’s Pension in his DB if this is relevant)

2.      Can be taken much more flexibly. Withdraw 20k for a hip replacement or a wedding gift, or reduce withdrawals if you have a quiet year stuck at home for any reason.

3.      Withdrawals can be timed to minimise the tax bill.

Woodbine, have you looked into the Lifetime Allowance (LTA). Multiply your DB x 20, and add the DC. If that’s close to 1 million you need to start paying attention. If you draw the DB at 65, that will use up 700k of your 1 mil. If you then go on to  draw 350k from your DC pot, you will be into the realms of substantial extra taxation. It looks like you are just on the safe side right now, but the LTA limit appears to be frozen for the foreseeable future, whilst your pension grows with inflation. If you take the DB at 55 (or 60), it’s unlikely you run into the LTA.