DB quandary

Redsox64

I have just turned 60 and have been in LGPS since 1983. I have worked part time since 1999 due to having children, youngest is disabled (age 22), so was never able to return to full time hours. I have R85 protection on 1/80ths part with an automatic lump sum of £44.5K, 1/60th retirement age of 65 and CARE is 67. I really don’t enjoy my job anymore due to becoming increasingly litigious and want out. I look after my daughter on my own (divorced 3 years ago). A recent estimate gave me a pension of £23,149, (with a reduction in the second 2 parts) if I take it now. I have an AVC worth £30K which I could take tax free or convert to extra pension giving me an extra £1,300 pension. I’m trying to weigh up whether just to bite the bullet or whether deferring my pension for a few years to limit reductions and living off some savings, also not sure what’s best to do with AVC. I have a cash ISA worth £20k and SS ISA’s currently worth around £26K and a property abroad worth around £100K which I would like to hang on to. I have a SIPP currently worth around £16K. Could I continue pay into the SIPP if I retire (what would be the restrictions?) Sorry for the long post but would welcome any thoughts on the AVC and retiring now or waiting. Thanks 

Nebulous2

There are some things missing for me. What do you currently earn? What would you need to live on in retirement? 

I'd take the pension now if it was enough to live on, the actuarial reductions are designed to be neutral, not punitive. 

The AVC is a marginal decision. Do you have a need for the cash, or would you need the £1300 to achieve the income you want? 

Post- retirement you could add £2880 a year to your SIPP, which would be rounded up to £3600 with tax relief until you are 75. 

Redsox64

Thanks Nebulous2 for your input. I currently earn £34K (part time salary). I have £19K remaining on my mortgage at 3.8%, not sure about paying that off? I guess ideally I’d like as close to that with any pension. Obviously I will get my state pension in 7 years time when I would be comfortable. 

Phossy

If it helps, I make the equivalent gross income to be £31,857 in retirement to match the £34k gross you have now.

Teaandscones

i was in a similar position to you. I have retired after 40 years in the LGPS.
I have taken minimum lump sum (commutation of 12 to 1 is crap) but taken the AVC as a lump sum as it is tax free.
Service up to 2008 has no actuarial reductions if aged 60 so actuarial reductions net are not punitive. 

WYSPECIAL

Redsox64 said:

Thanks Nebulous2 for your input. I currently earn £34K (part time salary). I have £19K remaining on my mortgage at 3.8%, not sure about paying that off? I guess ideally I’d like as close to that with any pension. Obviously I will get my state pension in 7 years time when I would be comfortable. 

If you want £34k a year in retirement and your DB pension taken now is £23k then you will have what you want by the time state pension kicks in.
You need £11k x 7 years to fill the gap which you more than have in the tax free lump sums available and savings.
Also bear in mind you will currently have costs associated with working and a mortgage neither of which you will be paying in retirement.

Redsox64

Teaandscones said:

i was in a similar position to you. I have retired after 40 years in the LGPS.
I have taken minimum lump sum (commutation of 12 to 1 is crap) but taken the AVC as a lump sum as it is tax free.
Service up to 2008 has no actuarial reductions if aged 60 so actuarial reductions net are not punitive. 

Thanks, I’m not tempted to commute any of my pension, as you say not a good rate, and I have my automatic lump sum as well as the option of the AVC tax free. Can I ask what you did with it? ISA (£20k max)? I guess it’s about affordability per annum? 

@WYSPECIAL thanks for your thoughts. I think if I can pay down an extra 10 % on my mortgage for another year then the early redemption charge will not be so high and more affordable to pay off in its entirety. Certainly not having that payment going out on a monthly basis would give me more to live on. 

Albermarle

Can I ask what you did with it? ISA (£20k max)? 

What is best for one person to do with a sum of money, is often very different to what another person should do, Everybody's personal circumstances and personality are different.

If you go over to the Savings & Investments forum , there are very regular questions along the lines of' I have a sum of money, do not know what to do with it'