Currently over LTA, should I activate DB scheme before or after 6th April 2024?

RogerPensionGuy

Currently have a DB and DC pension and they both about 60% of the current LTA. 

I'm fulling intending to activate the DB scheme before an election as I'm paranoid any new government will tweak pension stuff negatively for me personally.

I'm aware an election is possible anytime but, guessing it will be 2nd half of 2024 and has to occur by January 2025.

My current thinking is consumed should I activate before or after the 6th of April 2024 when apparently the LTA has been removed fully.

My intention is to prune my DC scheme up until state pension at 67/2029 and mostly stay out of the 40% income tax bracket as far as possible and as I see fit.

I'm aware when governments previously chop pension stuff they allow various protections etc.

I know it's a crystal ball. 

I just need to decide wether I activate DB scheme in March or April 2024.

Any views most welcome please.

arnoldy

Is your DB deferred private sector? If so the inflation protection in deferment is much better than in payment. As inflation is very sticky it might be worth waiting till it is slain. Assuming you are under NRA you will also get less actuarial reduction. I am in a similar position with DB and DC.

RogerPensionGuy

arnoldy said:

Is your DB deferred private sector? If so the inflation protection in deferment is much better than in payment. As inflation is very sticky it might be worth waiting till it is slain. Assuming you are under NRA you will also get less actuarial reduction. I am in a similar position with DB and DC.

DB scheme is limited to a maximum 5% increase due inflation in any year, I'm totally guessing inflation will be between 2.5 and 6% the next few years. 

DB pays 67% to spouse if I expire 1st.

NRA in DB/deffered scheme is 60 so it's currently rolling up at about 5.8% PA plus inflation up to that 5% limit. 

Pat38493

First, if you have a deferred DB scheme, I’m not sure that short of Marxist revolution the government can do much to it because it’s mainly dictated by the rules and deeds of the scheme and not the government policy - they could of course increase direct taxation but this would affect you either way.

As regards which tax year to do things in, I think it’s a tricky one because right now, the thing to be concerned about is the limit on your tax free cash.  If you put your DB into payment this tax year, you are still operating under the old LTA rules and this will reduce the amount of tax free cash you can take from your DC fund if you try to take tax free cash from the DC fund afterwards.

On the other hand if you take the tax free cash out of your DC fund now, and then take your DB pension, under the current law I am not really sure how any PCLS that you wanted to take would be impacted, but if you take no PCLS you would take no penalty because the LTA tax rate is zero.  Therefore as long as these rules are in place you might be better to take the DB pension afterwards, and also for the reason mentioned by Arnold that the inflation increases to DB pensions in deferment are done on a cumulative basis and therefore one or two years of high inflation you will still get the full increase.  Not usually so once you put it into payment.

The big issue is that after 6th April 2024 it’s anybody’s guess because the legislation to completely abolish LTA has not been put in place yet and we don’t even have draft proposals.

RogerPensionGuy

Just an update on this thread.

After much pondering and pondering, I have put in all the paperwork to activate my DB pension just after the 6th April 2024 and taking the maximum TFLS of about 190K due the commutation rate was X 25 and at aged just over 60, I felt it was the way to go.

My next 1st world problem is trying to place that 190Kish in a tax friendly environment and doing my research more focused I see the CGT allowance has gone form 12K a year ago to just 3K as of 2024/2025.

I was previously lazily thinking I could just plonk it in a GIA and leave it, then whenever I take it out make use of the 12K and was also thinking it would allow carry forward, unfortunately on reading up, not so simple, the only option I see to mitigate tax is to sell and buy 3K of units every year, all very clunky to a lazy fellow like me.

With my DB pension now starting of circa 27/8K-ish PA and a full ST in 6/7 years and liquid cash currently with present interest rates, I am in to the 40% income tax in 2024/2025 and just loads up when/if ST taken.

Funny that if interest rates drop to a lot my head would be clearer, but looks like any interest rates above 2% on cash savings will plonk me in 40% tax from this point and I expect rates will be 4% to 4.5%-ish for years due core inflation took a seat as too much cheap free money for far far too long (it was good while it lasted I guess)

I know I am suffering from tail wagging the dog, but after 46 odd years of working, being prudent, good DB and a DC pension(DC just there in case of being needed, yes it will pay 40% tax and thankfully 80K-ish TFLS or more if the LTA 1.073/268K slides up I hope, DB TFLS will of consumed 69% of LTA)

So I am in a nice position of just trying to mitigate tax, I looked a buying a flat and rent it out, but that just looks like so much work, hassle and potential to go wrong.

Can anyone suggest any simple ways to store this cash wealth?

ISA's are always used, so it needs to be something easy and simple and I would like to set it up, I don't favour IFAs as in the past I always found they just wanted me to plonk my DB and DC pensions under their umbrella and their overall charges looked very high, one IFA wanted a 5% chunk of pension pots as the went under his umbrella and 2,1% ongoing charges, so in year one, a 7.1% chunk removed and this got me very weary of IFAs, I am well aware their are plenty of great IFAs and some people absolutely get great value from them, but I would like it more simple.

Another thought I had/have in my head is to get an annuity using DC funds for simplicity, but hard wired income from that left alone DC pot just makes my tail wagging the dog issues more so.

Any views most welcome as I need to plan sumthink with this 190K-ish just arriving soon.

I just want a set and forget system as I don't want to be so involved as I get older, I am just trying to eek max value outa my cash cows you could say. 

PS. Premium Bonds are all full currently thankfully.

Sarahspangles

Premium Bonds?

Marcon

RogerPensionGuy said:

Any views most welcome as I need to plan sumthink with this 190K-ish just arriving soon.

I just want a set and forget system as I don't want to be so involved as I get older, I am just trying to eek max value outa my cash cows you could say. 

PS. Premium Bonds are all full currently thankfully.

Maybe use some of the £190K to pay for personalised financial advice? There may be various things you've not considered/fully understood (join the rest of us!) and proper advice, based on a full understanding of all relevant facts, could be one of your best investments yet.

NoMore

Marcon said:

RogerPensionGuy said:

Any views most welcome as I need to plan sumthink with this 190K-ish just arriving soon.

I just want a set and forget system as I don't want to be so involved as I get older, I am just trying to eek max value outa my cash cows you could say. 

PS. Premium Bonds are all full currently thankfully.

Maybe use some of the £190K to pay for personalised financial advice? There may be various things you've not considered/fully understood (join the rest of us!) and proper advice, based on a full understanding of all relevant facts, could be one of your best investments yet.

This ^. IFA's can get a bad rep on here, but this is exactly the situation where they can shine. in fact you should maybe get advice before you trigger the DB pension because you could still be missing something.

Also maybe accept at some point you will be paying more tax and you are in a very fortunate position to the vast majority of the population. Nothing wrong with you being tax efficient as possible but sometimes it just best to pay the tax and enjoy your life.

Somebody

I'm sure someone will come along and mention EIS, VCT and SEIS in a minute.......

FIREDreamer

How about EIS, VCT and SEIS?

RogerPensionGuy

Somebody said:

I'm sure someone will come along and mention EIS, VCT and SEIS in a minute.......

Thanks for posting, these look clunky and risky, I'm looking for something like an ISA that can accept large inputs.

I also hate with so much fraud having to open and juggle loads of different accounts keeping under 85K.

I like NS&I products for a one stop simplicity, but don't like their interest rates.