USS Retirement Options

daveshep26

LL_USS said:

NickBFS said:

If you have money in a pension pot, there normally are 3 ways to retrieve that money:
1) buy an annuity
2) take your money as Uncrystallised Funds Pension Lump Sums ('UFPLS')
3) flexi drawdown

Dear @NickBFS

I have had time to digest this note of yours, and again, thank you very much for your explanation (you've always been so helpful with these USS questions).

What you explained piece together what I heard here and there and yes lots of those make sense now. I forgot about the implication of MPAA when drawing down from the investment pot whilst one still wants to work and contribute further. The new MPAA of 10K is already better than the 4.5K level before, but still quite small for people with high salary still working a lot after taking from the DC pot. SIPP is worth considering if people plan early partial retirement, taking from the pot but still trying to put back. I understand now when they say they leave a bit in DC and try to build it back whilst transferring the rest out to SIPP to draw down from SIPP without triggering MPAA in their USS, to allow contributing back to the pot with USS. EDIT: if they transfer to SIPP it doesn't trigger MPAA right?, as technically they have not drawn down the pot, only transferring (a big part of) it out. Sorry I am still slow at this.

I think I will be among the "majority of USS members" as in your helpful conclusion - perhaps working till 65, retiring from USS, taking the DC mostly in the TFLS without crystalising the remaining DC pot (if there's any remaining). Ah, for this remaining DC pot, because I do not transfer to SIPP (I suppose it won't be much), do I draw down gradually every year at my marginal tax to be more tax efficient rather than taking all out together and pay maximum tax on the load right away?

You are correct- the transfer itself does not trigger MPAA (Official terms here - https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm056520#:~:text=A trigger event occurs for an individual when a stand,occurs immediately before that payment. )  - which generally cover at or immediately before 'income' or 'payments' made.

You also refer to transferring    '... a big part of) it      '   out. My understanding is the mechanism of doing so is limited to transferring 100% of the IB pot at a time (you can obviously recommence immediately afterwards again - to have that partial mix).

LL_USS

@NickBFS thank you, my plan is approved then. Just kidding - it's good to know the plan seems to be based on right understanding of the current rules, fear of missing out of the SIPP eliminated.

@daveshep26 thank you for the link - to be honest I have just tried to read the government's guidance in the link yet it still needs time to be all clear to me yet - so I just rely on your note for now. So transferring to SIPP does not trigger MPAA but one needs to transfer 100% of it out at a time (assuming they can still build it back using their normal AA).

NickBFS

LL_USS said:

So transferring to SIPP does not trigger MPAA but one needs to transfer 100% of it out at a time (assuming they can still build it back using their normal AA).

Correct. You can transfer from one pension fund (such as the USS IB) to another (such as a SIPP) to your heart's content. As long as the money and investments remain behind the pension tax shelter,  no MPAA will be triggered. It is only when you take taxable income out of its pension tax shelter that the MPAA is triggered.

You need to transfer all of the IB pension pot because USS does not allow partial transfers out: it is all or nothing.

However, transferring your IB pot out does not prevent you from continuing to put money in it, hence why you can continue to accumulate in it after the transfer out. Some people who want to retire early do just that: they transfer their IB pot to a SIPP a number of years before they plan to retire but rebuild their IB pot so as to be able to maximise their TFLS when they retire from USS. That way, when they retire, they can live on their SIPP for a few years and defer taking their main USS pension with maximum TFLS until later and not suffer the early retirement reductions on their main USS pension.

LL_USS

NickBFS said:

Correct. You can transfer from one pension fund (such as the USS IB) to another (such as a SIPP) to your heart's content. As long as the money and investments remain behind the pension tax shelter,  no MPAA will be triggered. It is only when you take taxable income out of its pension tax shelter that the MPAA is triggered.

You need to transfer all of the IB pension pot because USS does not allow partial transfers out: it is all or nothing.

However, transferring your IB pot out does not prevent you from continuing to put money in it, hence why you can continue to accumulate in it after the transfer out. Some people who want to retire early do just that: they transfer their IB pot to a SIPP a number of years before they plan to retire but rebuild their IB pot so as to be able to maximise their TFLS when they retire from USS. That way, when they retire, they can live on their SIPP for a few years and defer taking their main USS pension with maximum TFLS until later and not suffer the early retirement reductions on their main USS pension.

@NickBFS I am singing out loud "Suddenly I see..." - I may cook up a new plan if I continue to have much to make volunteer contribution to DC in later years then . Thank you so much!!