Keep hands off of defined benefit pension?

Cobbler_tone

I’ve picked through threads but can’t see any questions directly related. I just want to ensure my approach is sensible.

Age 55, same company for 30 years, salary £64k and target retirement 58.

DB pension closed in 2021 and 15 years will grow RPI (5% cap), 11 years grow at RPI (2.5% cap). Worth around £16k per year today (at 55) and £100k lump sum.

Current pot value of DC £85k and total contributions of £23k per year (inc. 12% employer). I could potentially pay a bit more but been increasing contributions steadily.

Question is…is there are discussion to be had in potentially taking the DB now and ramping up the DC contributions?

I’d think not and in real terms it would take my DC pot from around £150k to £200k by retirement. I have no use for the lump sum now and don’t need extra income. 

As it is all relative to life span, let’s assume I don’t die in the next 25 years!

I think I am doing the right thing in maximising my pension contributions using salary sacrifice but wanted to check I’m not missing a trick with the accessible DB and not incurring the reduction factor but taking earlier than I need it.

I have calculated that leaving it enables an inflation linked pension from 58 for life of £31k using the DB, DC drawdown and state pension, with the two lump sums on top.

Marcon

Cobbler_tone said:

Question is…is there are discussion to be had in potentially taking the DB now and ramping up the DC contributions?

I’d think not and in real terms it would take my DC pot from around £150k to £200k by retirement. I have no use for the lump sum now and don’t need extra income. 

I think you've just had the discussion with yourself and come to the right conclusion!

Cobbler_tone said:

I think I am doing the right thing in maximising my pension contributions using salary sacrifice but wanted to check I’m not missing a trick with the accessible DB and not incurring the reduction factor but taking earlier than I need it.

Don't understand this. Are you saying there's no reduction factor for taking it early?

Cobbler_tone

Marcon said:

Cobbler_tone said:

Question is…is there are discussion to be had in potentially taking the DB now and ramping up the DC contributions?

I’d think not and in real terms it would take my DC pot from around £150k to £200k by retirement. I have no use for the lump sum now and don’t need extra income. 

I think you've just had the discussion with yourself and come to the right conclusion!

Cobbler_tone said:

I think I am doing the right thing in maximising my pension contributions using salary sacrifice but wanted to check I’m not missing a trick with the accessible DB and not incurring the reduction factor but taking earlier than I need it.

Don't understand this. Are you saying there's no reduction factor for taking it early?

That was my bad, I meant not incurring the reduction factor, there is one. Thank you

squirrelpie

But what is the reduction factor? That obviously affects whether it is sensible to take it early? And what's the normal retirement date? And is the £100k lump sum compulsory, or can you change it?

Cobbler_tone

It has different reduction factors for different periods of the contributions. i.e. on some the NRA is 60 and on some it is 65.

My retirement age will be 58, it is the moment in time I have chosen.
The modelling tool on the pension website shows these numbers. As I said, I don't need the lump sum now but have plans for it at 58, although I may defer it another year as I may not need the income straight away.

Age 55: TFLS £99k    Pension £14,946

Age 58: TFLS £119k    Pension £17,897

Age 65: TFLS £175k    Pension £26,373