USS Retirement Cash Pot: What to Do?

gwt1965

I’m single with no dependents and will retire from the USS pension scheme age 60 at the end of January 2025.

USS is a hybrid scheme. My DB pension will be £23,612 with a 3x TFLS of £70,836. I’ll have £127,173 in the scheme's Investment Builder DC element. I can increase the TFLS without commutation to £157,413 and leave £40,594 in the Investment Builder. From advice I've seen on the Pensions, annuities & retirement planning forum, this is the optimum choice because taking the DB and DC elements together at retirement is a one-off opportunity to get the maximum tax benefit.

But it will leave me with a large amount of cash, not all of which I need access to. My budgeted yearly expenditure will be £34k after tax. To bridge between 60 and 67, when I will receive the full SP, I need c£12k pa, after taking into account another small DB pension (c£1k). I also have a S&S ISA (c£25k), a SIPP (c£36k), and cash (c£45k).

So I'll have a cash pot of c£200k. I would feed £20k into an S&S ISA in February 2025 and another £20k in April 2025. I'd also like to keep 3 years of bridging in cash + £10k cash buffer (say £50k altogether). That would still leave me with £110k in cash.

I could clear my mortgage (£20k), although it's fixed at 1.99% until the end of 2025 and I could just pay it down and keep the cash in a savings account with a higher interest rate. I will already max out pension contributions (including carry forward) for this year so I can't put any of it there. 

My thinking was to put the remaining cash into a general investment account and bed and ISA each year until I’ve moved everything across. Does this sound sensible? What kind of investments would work for such a GIA account? I don't mind some risk given that much of my core expenditure is covered by guaranteed income.

Any advice appreciated. 

MPLMPL

I'll be in a similar position with USS pension in a months time. I'll be taking the max TFLS because of the link between the Retirement Income Builder (DB) and Investment Builder (DC). This means I'll be able to take just short of the entirety of my DC portion tax free. £20k into both mine and wifes S&S ISA, clear mortgage (only ~£8k left, but at base rate + 0.19%, fixed in 2006 or so), £3,600 a year into each of our SIPPs and the rest in GIA to feed into ISAs and SIPPS in future years.
I'm sure you are aware of this, but with no pensionable earnings you can still add £2,880 (£3,600 gross when tax relief added) to your SIPP each year until you are 75.

One thing to consider is commuting the 3XDB PCLS to additional pension (you can't commute Investment Builder, only PCLS). Reverse commutation factor is 22.75 at 60, you would need to check how much additional pension it would buy you using the modeller, but I think an extra £3,113 if you reverse commute the 3XPCLS of £70,836 (1000/22.75*70.836). This would leave you with a higher DB pension and should allow you to take the entire £127,173 from the Investment Builder tax-free.

gwt1965

Thanks @MPLMPL. My retirement quote from USS gave the reverse commutation figure (an extra £3,113 pa as you calculate). Just can't convince myself that it's a good deal. I know it's index-linked (up to scheme limits) but after 20% tax the break even point is 20+ years.