Looking to retire soon……best options?

chalkybar

xylophone said:

Have both you and your wife checked your SP forecasts?

https://www.gov.uk/check-state-pension

With regard to the DB pension, was normal scheme pension age 60? If not, what was it?

This is a deferred DB pension - presumably the scheme was contracted out of SERPS.

If so,  did you have both pre and post 88 GMP and how does the GMP revalue in deferment?

Has the scheme undertaken GMP equalisation?

How does the excess over GMP increase in payment?

I’m a female…..so yes, the scheme was payable at 60. 

I would assume it was probably contracted out of SERPS, I think this was fairly usual for large corporations as they benefited?
I was a member from about 1987-99
There’s a page that states the final salary is payable unreduced on 1/10/2025 (the date they carried out the quotation) stating…. 

The illustration is based on revalued pension at age 60, actuarially inc for late payment. The basis of late retirement is routinely updated so cannot be guaranteed.
The unreduced value of revalued deferred final salary pension is £7153….
sorry, a lot of this jargon is lost on me……
it mentions GMP as being worked on but is a complicated process……if I take my pension now, I have to sign to acknowledge that no current action has been taken, and no guarantee of any future top ups to benefits at a later date.

DRS1

chalkybar said:

QrizB said:

chalkybar said:

I’m also aware that when SP kicks in (currently, anyway) the higher your private pension payout…the more tax you will pay above the personal allowance?

Yes, but generally it's better to get 80% of something rather than 100% of nothing.

👍 My thinking was if you took a lump sum and shoved it into an isa, you would preserve its tax free status….and actually gain a bit of interest in the process. Whilst reducing the amount you have to hand over to the taxman….

True but if your total taxable income in a tax year is £9100 you won't actually be handing anything over to the tax man.  All that income will be covered by your personal allowance.

OK when the SP kicks in you may be on £22k vs £18k or £19k if you take the lump sum.  Either way you will be paying some tax.  With no lump sum you may be paying £800 pa more. 

One thing we haven't mentioned is have you worked out what income you would need in retirement.  You mention £20k but is that for 63 - 67 only or after 67 as well.  If so £18k or £19k means you will need your savings to contribute to your spending for more than 4 years and what happens if something expensive comes along (like dental implants!)

If you got 4.5% interest on the £45k lump sum that would give £2025 interest pa.  Interest rates are going down so 4.5% may be optimistic.  The pension given up would be more than that and would be increasing.  But it would be taxable (and you may get tax free interest).  It is probably a close call.  Other people may be investing the lump sum and banking on more than 4.5% return but that would involve taking investment risk.

DRS1

chalkybar said:

xylophone said:

Have both you and your wife checked your SP forecasts?

https://www.gov.uk/check-state-pension

With regard to the DB pension, was normal scheme pension age 60? If not, what was it?

This is a deferred DB pension - presumably the scheme was contracted out of SERPS.

If so,  did you have both pre and post 88 GMP and how does the GMP revalue in deferment?

Has the scheme undertaken GMP equalisation?

How does the excess over GMP increase in payment?

I’m a female…..so yes, the scheme was payable at 60. 

I would assume it was probably contracted out of SERPS, I think this was fairly usual for large corporations as they benefited?
I was a member from about 1987-99
There’s a page that states the final salary is payable unreduced on 1/10/2025 (the date they carried out the quotation) stating…. 

The illustration is based on revalued pension at age 60, actuarially inc for late payment. The basis of late retirement is routinely updated so cannot be guaranteed.
The unreduced value of revalued deferred final salary pension is £7153….
sorry, a lot of this jargon is lost on me……
it mentions GMP as being worked on but is a complicated process……if I take my pension now, I have to sign to acknowledge that no current action has been taken, and no guarantee of any future top ups to benefits at a later date.

Interesting.

Is there a bit that splits the pension out into sections

Pre 88 GMP
Post 88 GMP
Excess over GMP

Is there anything saying how the pension increases when it is in payment?  

I don't think the acknowledgement is anything to worry about.

chalkybar

Pre 88 GMP
Post 88 GMP
Excess over GMP

Is there anything saying how the pension increases when it is in payment?  
————

I can’t see anything that mentions this……..

Yes, I’ve done an overheads type of retirement budget…….to include all utilities, foods, car costs, insurances, basic day to day spend, adhoc hols & entertainment and nominal maintenance/repairs. All doable from me at basic £12-14k a year….my hubby is a bit younger than me so will continue to work for another 1-2 years before his pension kicks in (a bit less than mine).
 We pretty much spilt all the home costs. He also has an inheritance going through currently which we could use for any home improvements…..
I mentioned the £20k for use to cover until my SP kick in…..so about £6k/y to top up the £9k as was the original pension quote.

xylophone

I was a member from about 1987-99

When you left, were you not given a statement of deferred benefits showing pre 88 GMP, post 88 GMP and excess over GMP? 


You are female so reached GMP age at 60 (the age at which women born on or before on or before 5/4/50 reached SPA).

https://techzone.aberdeenadviser.com/public/pensions/Tech-guide-guaranteed-min-pen

You are about to bring your occupational pension into payment - this is likely to mean that the amount of your pension representing the revalued 

pre 88 GMP will not increase in payment, the part representing  revalued post 88 GMP will increase by up to  3%, while the excess will increase

as specified in scheme rules (RPI/CPI/ a fixed percentage etc....... You should check with the Administrator/scheme guide.



Regarding the Pension Commencement Lump Sum, see  https://techzone.aberdeenadviser.com/public/pensions/Tech-guide-tax-free-cash under

Defined benefit (DB) schemes and tax-free cash

As for GMP equalisation, see https://epa.towerswatson.com/accounts/rsa/public/rsa-group-pensions-rigps-gmp-equalisation-faqs/

Have you checked your State Pension Forecast?
 

LHW99

Have you checked your State Pension Forecast?

...and read the whole page, not just the headline?

dont_use_vistaprint

You have to balance long term with now and the medium term when making decisions like this. As you get older it makes sense to shift your focus a little to now and medium term - lots of us don't even make the long term or it's not how we expected.

I took mine, not the maximum, but enough to reduce my pension so I won't pay any tax when combined with savings interest. A reduced pension  is fine because other things kick in later on, the lump sum wasn't really needed, I had other options to release cash, but it was nice. 

if I was just gonna take it and stick it in savings I wouldn't bother because in my opinion the CPI indexing and extra for leaving it untouched is a better gamble right now than low interest rates or S&S  

RateTartExtraordinaire

@chalkybar I was a member from 93 to 97.
My NPA has been frozen at 62 as a deferred member. Probably because I joined later than you.
 I have post 88 GMP capped at 3% increase RPI, the later contributions in excess GMP are capped at 5%

SALPS have been managed by Tower Watson for a while. On the DEC newsletter it says they are moving to a new member zone some members have already been invited but they are doing it in stages and in the next few months for defered members: PIC. 

The trustees have done a buy in to cover any liabilities with insurance. They keep hinting that this may be followed by something called a buy out. This would mean each member would have an individual insurance policy to cover their liabilities.

Does anyone have experience of how a buy out would address inflation increase on these older pensions? I am guessing they would send everyone an individual quote. 

FIREDreamer

RateTartExtraordinaire said:

@chalkybar I was a member from 93 to 97.
My NPA has been frozen at 62 as a deferred member. Probably because I joined later than you.
 I have post 88 GMP capped at 3% increase RPI, the later contributions in excess GMP are capped at 5%

SALPS have been managed by Tower Watson for a while. On the DEC newsletter it says they are moving to a new member zone some members have already been invited but they are doing it in stages and in the next few months for defered members: PIC. 

The trustees have done a buy in to cover any liabilities with insurance. They keep hinting that this may be followed by something called a buy out. This would mean each member would have an individual insurance policy to cover their liabilities.

Does anyone have experience of how a buy out would address inflation increase on these older pensions? I am guessing they would send everyone an individual quote. 

The buy in means that the assets are owned by the insurer but the trustees of the pension scheme are still in charge.

The buy out will mean your pension continues in the same form (escalation, spouse etc) but paid directly from the insurer with no interaction with the trustees.

If the pension scheme has any assets remaining (unlikely?) they could be used by the scheme to provide the members with a one off additional pension increase, or handed back to the sponsoring employer. The scheme will then be wound up.

Vitor

This is really a DB commutation decision, not an investment one. On your figures you’re giving up about £2,400 a year to get ~£45k, which is a middling commutation rate rather than an obvious bargain. Remember that the DB pension is inflation-linked and paid for life, which becomes more valuable the longer you live.

You already have decent liquidity in ISAs to bridge to state pension age, and ISA drawdown is tax-free. Using savings as a bridge is exactly what they’re for.

Unless you need capital for a specific purpose, the default position is usually to keep the higher guaranteed income and spend savings as planned.