DB and DC pensions

Roryboy2011

I have two DB pension schemes from previous organisations and an old DC and a current DC scheme. Am I right in thinking that if I commence my DB schemes but continue working and making contribution to my current DC scheme that this won't trigger the MPAA? 

My situation is this...I need to try and buy my husband out of our house so I am considering taking my lump sums out of my DB schemes but that will then trigger the monthly income from both pension schemes (which will push me over the 40% tax threshold) so I wondered if I could increase my AVC's from my salary into my current DC scheme to offset the additional income and keep me in the 20% tax bracket. Is that possible/legal? Any pitfalls?

Albermarle

Roryboy2011 said:

I have two DB pension schemes from previous organisations and an old DC and a current DC scheme. Am I right in thinking that if I commence my DB schemes but continue working and making contribution to my current DC scheme that this won't trigger the MPAA? That is correct

My situation is this...I need to try and buy my husband out of our house so I am considering taking my lump sums out of my DB schemes but that will then trigger the monthly income from both pension schemes (which will push me over the 40% tax threshold) so I wondered if I could increase my AVC's from my salary into my current DC scheme to offset the additional income and keep me in the 20% tax bracket. Is that possible/legal? Any pitfalls?

Yes you can increase your contributions from your earnings. Depending on how your contributions are taken from your salary, this will either mean you will not pay any 40% tax, or you can claim it back.

bjorn_toby_wilde

Roryboy2011 said:

Any pitfalls?

Taking the DB pensions early will reduce the annual income from them. Actuarial reductions should be in your scheme documentation but could be anywhere from 3-5% per year early.

You haven’t said how old you are but you will need to factor this in.

Roryboy2011

@Albermarle, I pay my contributions and AVC's via salary sacrifice. My contributions are already at the max (8%) so if I increase my AVC's by the amount I would get each month from the two DB's that will keep me in 20% bracket?

Roryboy2011

@bjorn_toby_wilde, thanks for your reply. I am 61 but want to carry on working for a few more years yet.

Albermarle

Roryboy2011 said:

@Albermarle, I pay my contributions and AVC's via salary sacrifice. My contributions are already at the max (8%) so if I increase my AVC's by the amount I would get each month from the two DB's that will keep me in 20% bracket?

If you are currently very close to paying higher rate tax then what you suggest would make sense.
Plus at least you will be building your pension pot up quicker of course .

Brie

I'd be reluctant to start a DB scheme any sooner than really needed.  is there a way to release money from the old DC scheme? and take some of the money from that instead to keep the DB guarantees intact.  must admit I don't know much about the MPAA rules and how taking money out of a DC scheme might effect things.  

was there a reason to not consider a mortgage?  Banks do allow them for older people than they used to.

bjorn_toby_wilde

Roryboy2011 said:

@bjorn_toby_wilde, thanks for your reply. I am 61 but want to carry on working for a few more years yet.

In that case it might well be worth doing. I’d check the actual rates before you make the decision though.

As you say, you can afford to top up your DC pension and if you’re planning to keep working for a few more years you won’t have much of a gap to bridge to your state pension at 67 anyway.

LHW99

What is the NRA from the DB schemes? ie how many years early would you take them?

Also, could there be a possibility of only putting one into payment, but converting some of the pension into lump sum, to get what you need?

It would depend on the conversion rate (some are pretty poor), and how much you actually need / how much the scheme allows you to convert.

DRS1

To answer the question from the OP I don't think taking a pension from a DB Scheme triggers the MPAA.  I think it is only taking taxable income from a Money Purchase scheme which triggers it.

Roryboy2011

DRS1 said:

To answer the question from the OP I don't think taking a pension from a DB Scheme triggers the MPAA.  I think it is only taking taxable income from a Money Purchase scheme which triggers it.

Thank you for your reply. Do you know if it is possible to take the 25% tax free lump sum from a DC but not take any of the taxable amount so not to trigger the MPAA? e.g could I purchase an annuity but not start the payments?