USS Pension Questions

Ballymoney

This may be a slighty odd (or simple) question but, within the USS pension, is it possible to view the total size of your pension pot? Or is it just displayed as an annual DB salary and a total DC value?

And a second question if I may. I want to start making a monthly voluntary contribution to my pension. I'm 41, hoping to retire early (62ish). Is it a no brainer to start making the voluntary contributions ASAP? Or is there any benefit to waiting for the the potential USS reforms on the horizon which will hopefully see the reversal of the 2022 cuts? If they raise the DB cap back to somewhere close to pre cuts it will be above my current salary.

Thanks all.

ussdave

The only way to see a "pot" value like you've suggested is to request a CETV.  It's a bit of a pointless endeavour though, as it's not going to give you anything useful.

It's almost certainly a good idea to begin additional contributions immediately, especially if you're able to do so via salary sacrifice.  You'll benefit from the tax saving as usual, but also can potentially get a very large amount of cash out tax free due to the DC and DB elements being linked if taken at the same time.

Ballymoney

Thank you. Wasn’t sure if it was beneficial to wait and see what happens with the industrial action / USS reforms before I begin with voluntary contributions but I’ll get the ball rolling now.

ussdave

I missed the bit where you mentioned the salary cap and were concerned about the changes impacting your decision.  Basically, it's nothing to really worry about, but it does mean that if your wages are between 40/41k and the potentially restored cap of 60k that you'll be accruing less into your Investment Builder each month (though this will be offset by the additional Retirement Builder benefits you build up).  

Extra Investment Builder money is definitely going to be a benefit, so I think you've made the right choice   I'm also 41 and hoping to go by 60 at the latest.  My current tactic is to pay an extra 6% by salary sacrifice into the Investment Builder and to put 1-2% into a SIPP (which I opened with Fidelity to hopefully lock in the access at 55).  I'll continue to increase my Investment Builder percentage each year in a roughly 50/50 split with wage increases and closer to retirement I'll significantly increase my SIPP funds, or potentially draw them as small pots to 'recycle'/double the tax breaks.

That's all probably a bit over the top if you're planning to go at 62ish.  I might reconsider this approach myself should the pension benefits be significantly restored.

Ballymoney

This is all extremely useful and has given me some good food for thought. Thanks again @ussdave.

Universidad

ussdave said:

The only way to see a "pot" value like you've suggested is to request a CETV.  It's a bit of a pointless endeavour though, as it's not going to give you anything useful.

My experience of USS CETV value for the DB portion is that they are very low.

While the DC portion may just be reflected as a pot of money, the DB value isn't about either what you can expect to recieve, or about what you have paid in.

Rather, it's obligated to be essentially the amount of money that USS estimate they'd need to invest in order to be able to afford to pay your pension. The further you are from retirement, the lower it will be.

I'll say this: if they were nearly as optimistic about their investments when taking my money, as when I asked them to give it back to me, I might not have left the scheme.

Meanwhile if they were willing to give me nearly what I'd given them, I would have transferred to my new workplace pension scheme!

As it is, I remain a deferred member - apologies to the members who stayed and have been subsidising my pension with deficit recovery contributions!

Cornish_mum

Hi Ballymoney, myself and my husband are both USS and been contributing extra into the investment builder via Sal sac since the 2016 reforms. 

I ramped up from an extra ~ 3% to 25% AVC by adding increments and promotions to my pension contribution; so to keep my take home increasing with inflation but nothing more. Never thought I would manage such hefty contributions but I didn’t even notice! Planning to retire early between 58-62 years depending on DC performance. I also have a S&S ISAs passive fund with vanguard but this is about 15% of my AVC amount. I personally think the USS DC funds are perfectly ok and the NI savings via sal sac and lack of any charges is a big plus 

CM

Ballymoney

Cornish_mum said:

Hi Ballymoney, myself and my husband are both USS and been contributing extra into the investment builder via Sal sac since the 2016 reforms. 

I ramped up from an extra ~ 3% to 25% AVC by adding increments and promotions to my pension contribution; so to keep my take home increasing with inflation but nothing more. Never thought I would manage such hefty contributions but I didn’t even notice! Planning to retire early between 58-62 years depending on DC performance. I also have a S&S ISAs passive fund with vanguard but this is about 15% of my AVC amount. I personally think the USS DC funds are perfectly ok and the NI savings via sal sac and lack of any charges is a big plus 

CM

Some seriously impressive levels of AVC there CM. I’ll be nowhere near those levels but hope to kick off with the 5% we’re likely to receive in the latest pay offer. I’ll likely have to up this at a later stage to hit the levels I want in retired life but it’s a start.

SMcGill

As mentioned already there’s no ‘pension pot value’ for DB pensions but there will be a CETV value (if you’re thinking of moving out of USS) which will vary a lot, and there is a LTA value which USS estimates as 20 x your DB pension. Come the day that you are nearing the LTA that might be helpful.

bluenose1

I am no good at explaining it (need USS Dave or Swindiff for that) but the other advantage of having a DC pot if you are in the USS pension scheme,  is that if you take it at the same time as your DB pension you get more out of your DC pot tax free.
I have been contributing the max I can to my DC pot for last few years, leaving myself with the mandatory NMW, as intending to retire in next 4-12 months. I see it as the best rate savings scheme I can get to bridge the gap between 57 and  67, because of salary sacrifice etc.
Think I am going to need it as we have decided to get a dog and already beginning to realise the costs entailed  

swindiff

There are several advantages to the USS IB fund over a SIPP as bluenose1 says.  There are no fees (they are subsidised), you can salary sacrifice, so save on national insurance as well as income tax on your contributions, and your DB pension is considered when calculating the Tax Free amount that you can take.
As an example if you had £100k in a SIPP, you could take £25k tax free
If you had £100K in your IB, plus a £10K annual DB pension you could take £82,500 tax free.
Your £10k DB pension is multiplied by 20 to give it a "value" and added to the DB lump sum of £30k (3x annual DB pension) and the DC pot of £100k
This gives a total of £330,000, 25% of which can be taken tax free = £82,500
£30k of that was the DB tax free lump sum, the remaining £52,500 can be taken from your IB pot.
You have therefore increased the amount of tax free cash you can take from your DC pot from £25K to £52,500, an extra £27,500 tax free cash.