USS advice 30 January at 7:21PM in Pensions, annuities & retirement planning 15 replies 763 views

HIA

I stopped working 18 months ago aged 57 and have delayed taking my two db pensions, mostly with USS but 4 years NHS. I am living off capital and have budgeted so that I can do that for up to another three years. I got a forecast from USS when I stopped working and again last year and the increase seemed more than I could earn from investment. Am I doing the right thing or should I take my pensions now and invest my capital? I currently have half in a bank savings account and half in a s&s ISA.  Of course this is all dependant on lifespan which nobody knows.

Dazed_and_C0nfused

If you currently have no (or negligible) taxable income and won't start the DB pensions for a while you could do worse than funding a SIPP or personal pension with £2,880 each (tax) year and having a free £720 added in tax relief.

Then take the whole lot out and pay no tax.

That is assuming you have no problem with triggering MPAA which will limit future DC contributions to £4,000/year (gross).

If you have no intention of working again MPAA shouldn't be an issue though.

HIA

Thanks, I forgot to mention I have opened a sipp with my ISA provider and funded it in the last two years for the tax relief. I'm also short one year NI for full state pension at 67 but expect to claim that for looking after my grandchild.

SMcGill

The USS annual increases for deferred pensions is in line with public sector pension increases, it’s not connected to any investment strategy they have (unless you have a DC pension with USS as well as a DB pension)

What is the Normal Retirement Age for your pension? USS don’t give an actuarial increase to pensions that are deferred beyond NRA, but they do apply an early retirement factor if you take it before NRA.

HIA

It's 65 but I will definitely need to take it before then. 

Universidad

Do you know what your retirement age is for USS?

HIA said:

It's 65 but I will definitely need to take it before then. 

Are you sure it's 65? As I understand it, between 1997 and 2011 it was 63.5. Between 2011 and 2020 it was 65. From 2020 it is 66.

If you left in 2014 after 17 years, just for example, then you'd have 14 years at 63.5 and 3 at 65, and it probably wouldn't make a huge amount of sense to wait to 65 to take it, depending on how all the other stuff falls out for you.

HIA

I transferred my 26 year local authority pension into USS in 2011 when I started work for a university. I realise what I'm doing in delaying is decreasing the penalty for retiring early.

NedS

Universidad said:

Do you know what your retirement age is for USS?

HIA said:

It's 65 but I will definitely need to take it before then. 

Are you sure it's 65? As I understand it, between 1997 and 2011 it was 63.5.

I read it as NRA is still 65, but you could take the pension early at 63.5 without reduction (if you are aware of the scheme rules and have read the small print, but easily missed or overlooked)

HIA

I will check but either way am I doing the right thing in delaying to avoid reduction and living off capital rather than taking my pension now and keeping my savings in the bank/ISA?  I still have enough capital for example to purchase a buy to let to supplement my pension if I took it now.

NedS

HIA said:

I will check but either way am I doing the right thing in delaying to avoid reduction and living off capital rather than taking my pension now and keeping my savings in the bank/ISA?  I still have enough capital for example to purchase a buy to let to supplement my pension if I took it now.

I plan to do the same - bridge the years between early retirement and taking DB(s) NRA so as not to take them early with actuarial reduction. My USS pension is all pre-2011 so can be taken at 63.5 without actuarial reduction. If you have years that fall under varying periods, it is probably beneficial to take at the earliest age as that portion would not be increased for taking it later although the other portions would be reduced. You'd have to do the maths to see if it works out to be beneficial for you taking the pension 18 months early at 63.5 versus the actuarial reduction on the post-2011 portion.

swindiff

There is quite a step change in pension reduction if you take it before you are 60.  Have you had a look at the modeller.  If I use my own as an example my pension reduces as follows

from 61 to 60 and 11 months £30 reduction
to 60 and 10 months £440 reduction (not sure why there is such a big reduction here)
to 60 and 9 months £20 reduction
to 60 and 8 months £20 reduction
to 60 and 7 months £10 reduction
to 60 and 6 months £30 reduction
to 60 and 5 months £10 reduction
to 60 and 4 months £10 reduction
to 60 and 3 months £30 reduction
to 60 and 2 months £10 reduction
to 60 and 1 months £20 reduction
to 60 and 0 months £20 reduction
to 59 and 11 months £1,210 reduction (for this reason I would not take mine before I am 60)

These reduction are cumulative

I think this is mainly down to when the pension was final salary although pension age was 65 it was in our contracts that we could retire at 60 with no actuarial reduction.