USS drawdown options in early retirement

gwt1965

LL_USS said:

 Can we trust USS helpline??????????????????????

Probably not, because calculating that way — 25% of combined DB and DC — doesn't match what the modeller gives as max TFLS without any commutation. 

LL_USS

@ussdave and @gwt1965

Thank you. That's why I don't like to ask them (or advisors) questions. They tend to be vague and do not come down to actual numbers.

When I raised the question, I was very clear: Tell me, is it 25% of (DB*20+DB*3) OR 25% of (DB*20+DB*3+DC)

Anyway, it meanns their answer is not helpful or confirming anything. Boo.

EDIT: Please ignore this too. See answers from MPLMPL after this post.

MPLMPL

LL_USS said:

@ussdave and @gwt1965

Thank you. That's why I don't like to ask them (or advisors) questions. They tend to be vague and do not come down to actual numbers.

When I raised the question, I was very clear: Tell me, is it

25% of (DB*20+DB*3)

OR

25% of (DB*20+DB*3+DC)

Anyway, it meanns their answer is not helpful or confirming anything. Boo.

If that is what you asked them, then their answer is correct. It is not calcualted as 25% of (DB*20+DB*3). You have to include the portion of the DC that you are taking in the calculation. 

LL_USS

MPLMPL said:

If that is what you asked them, then their answer is correct. It is not calcualted as 25% of (DB*20+DB*3). You have to include the portion of the DC that you are taking in the calculation. 

Thank you @MPLMPL. I will make an attempt to play around with the benefit illustrator in my account when I have a chance and see.

MPLMPL

I should add, that 25% of (DB*20+DB*3+DC) is not the way to calculate the max TFLS without commutation, but it is how the TFLS is calculated when taking DB and DC together. The value that this equation delivers is the 3xDB PCLS plus the TFLS from the DC.
The issue is when the DC is more than the max TFLS. This is then when you have to ask for a quote without commutation of the remaining DC.

Example. If DB is £20,000 and you have £100,000 in the IB (i.e. DC).
To calcuate max TFLS you can take from IB in addition to the 3xDB PCLS, multiply by 11/3 (i.e. 3.667) = £73,333
This leaves £26,667 in the IB. This is uncrystallised and therefore can be taken as UFPLS or transferred to a SIPP, either way, 25% of this remaining investment builder can be taken tax free at a later time.

If you ask for max TFLS without commutation of remainder of the IB, it should come to £133,333. This is comprises of  the £73,333 from the investment builder along with the £60,000 tax free you receive as the standard 3xDB PCLS.

If you use £73,333 as the DC amount in the equation that USS provided you, you get: 25% of (DBx20+DBx3+DC) = 0.25 x (£400,000+£60,000+£73,333) = 0.25 x  £533,333 = £133,333.

The other quick way to work this out is to multiply the DB by 20/3 i.e. £20,000 x 20/3 = £133,333.
11/3 of this being the DC you are taking from the IB and 9/3 being the 3xDB PCLS.