USS tax free lump sum age 68

cymraescaerdydd

my husband is still working full time and not intending to retire till 70 ish, has 40+ years in USS. Can he draw down his tax free lump sum any time or does he have to start flex retirement? If he flexes 20% down does he have to take the same proportion pension as TFLS or could he take 80% TFLS? planning to do house renovations whilst we can enjoy it. Thanks for advice.

Barralad77

If he has money in the Investment Builder he could take that now. Otherwise he could flexibly retire (e.g., reduce his time by 20% if that’s the most he would want to reduce his hours by) and he could take up to 80% of his pension but he’d have to take (e.g.,) 80% of both ‘parts’ (80% of the annuity and 80% of the TFLS). There’s no way I know of taking just a cash lump sum on its own (other than, as above, he has money in the IB).

cymraescaerdydd

very helpful, thanks

Nick_Dr1

My understanding is that he can take 6.67 times his annuity as a tax free lump sum as long as there is enough money in the investment builder. This is a feature of the USS hybrid scheme.
So he could flex by reducing his hours down to 80% (or less)  and then he could start taking pension at up to 80% (or less). Whatever fraction of his pension he decides to take, the TFLS can be up to 6.67 x the annuity that corresponds to. He does need to take some actual pension though.

Basically, I think he needs to flex. If he just pulls out the IB part as cash I think that only 25% of that will be tax free and it may trigger MPAA.

The modeller can tell you what you should get for different percentages ie ask it what full pension is and then directly take the percentage of that you are interested in. This will be pretty close. Then ask USS for a quote, just to be sure!

Another advantage of this is he will have some time to actually do the renovations as well!

cymraescaerdydd

ah this sounds very useful - would plan to flex down by 20% and the x6.67 from the IB would work well to aviad the tax that would come from taking out the IB alone. many thanks, great help.

MarlowMallard

cymraescaerdydd said:

ah this sounds very useful - would plan to flex down by 20% and the x6.67 from the IB would work well to aviad the tax that would come from taking out the IB alone. many thanks, great help.

I agree with Barralad77 and Nick_Dr1 . Note the x6.67 is only partly from the IB - you have to drop hours by at least 20%, then you can take up to 80% of annual pension, and 3x that is the "standard" lump, and under HMRC rules you can take an extra 3.66x lump from the Inv Builder tax-free at the same time you start the annual pension. 
But if you don't start any annual pension you can only take 25% of the Inv Builder tax-free. 

cymraescaerdydd

thanks- also helpful -would only want to take 20% pension to avoid higher tax ongoing, but want to get a bigger chunk of the IB out tax free.