USS - best place to start?

Snozzle

I've relented and if I want this sorted…… so I need to start from scratch and learn fast and have a longer term plan than just year to year.

I have taken a couple of days off to try and sort the families finances for the longer term. Having asked for years when my OH plans to retire, he has no idea & doesn't want to / hasn't the head space to think about it. Basically isn't interested.

I now have access to his pension forecast on myUSS and can see the forecasts. We are 54.

I have a tiny defined benefit pension at 60 and am currently putting all my (5K) earnings into a private SIPP with ii.

For the last few years, without access to his pension information, we have been living off my income and paying enough into a Standard Life SIPP for him to be just below the higher rate tax threshold.

We are at that stage again, but having read quite a few of the USS threads, I am now thinking he (me by default) many havie been missing a few tricks….

Namely, he has always said his retirement age increased to 67. Is this correct? And if yes why on the USS pension forecast does it say 'at 66 your projected benefits could be'?

I believe I should move his SIPP away from Standard Life due to the higher fees. Would I / he be better to start paying AVC's again from his salary instead of moving to say ii and making a lunp sum annual payment (I need to research the best place still).

Finally, having played around with the benefits modeller (more needed), it suggests his annual pension at 67 would only be £2 more than at 66 and deferring to 68 he would actually be £5 worse off. All these figures are based on him stopping work at 60 but not claiming his pension till either 66, 67 or 68.

Any advice on where to collect the best information would be much appreciated.

MarlowMallard

If he's planning on stopping work just after 60, then it may be beneficial to take the pension immediately. The reason is if you retire from active USS employment after 60 with employer consent, benefits accrued pre-October-2011 will be paid in full. Benefits from Oct 2011 - Oct 2020 (correction) will have an actuarial reduction related to number of years before 65, then benefits from 2020 to now will be reduced by number of years before 66, i.e. post-2011 years are tied to state pension age at the time you accrued each chunk of pension, not "now". So, for years from c.2027 onwards it will be reduced pre-67, but that is presumably a small fraction of the total years.

So, deferring to 65ish will get more pension, but you'll take a very long time to gain back what you didn't take 60-65.

If he stops work before 60, then the actuarial reduction on pre-2011 benefits will probably apply from age 63.5 , unless his contract said 60. The reduction factors are available by googling for "factors used by USS" , it is roughly 5 percent per year early. So, if you stop before 60 it's probably best to defer to 63.5 before drawing the pension.

Another point is it may be better to pay into USS Investment Builder (the DC part) instead of another SIPP, as you can link the DB and DC parts and get a large chunk of Investment Builder out as tax-free cash at the point when you start the DB pension. This is probably not possible with the SIPP.

UncleTomCobley

No advise from me - only some initial suggestions and comments. The USS is quite ranging and it can be tricky to give useful general details due to the amount of variations.

However, it may be helpful, to shape your thinking and decisions, to find out if:

OH has contributed, by default, to both the defined benefit (Retirement Income Builder) and the defined contribution (Investment Builder) parts of the scheme. This default contribution into Investment Builder is based on salary levels.

OH's USS version is salary sacrifice - This is esp. useful if a basic rate taxpayer but still a 2% increase over a SIPP for higher rate payers. How long the OH has been in the scheme - you noted the pension age moving to 67. People in the scheme often find that they a set of pots (tranches) of contributions. For example a set when the scheme retirement age was 60 (possibly going back a while for this), another when it was 63 and a half, another when it was 66 and so on.

OH's AVCs (contribution to the investment builder).

The main things I have found the USS noteworthy at are

a) The charges for the defined contribution scheme are low (mainly due to the scheme of the scheme)

b) The USS as a hybrid scheme can allow (based on personal contributions etc) a portion/all of the defined contribution to be taken tax free (https://www.uss.co.uk/for-members/your-pension-explained/how-your-pension-works/managing-your-hybrid-pension). I found this an excellent feature, well beyond what a personal pension could offer in terms of tax free lump sums..

c) Especially for people who have been in the scheme for a long time (and with the above mentioned sets of pots), in financial terms, retiring sooner can has minimal impact.

As you mentioned – there is a raft of very good (though sometimes complex) comments on the USS scheme on the forum that can help get the outcome you and your OH want. Others here are also much more au fait with more techincal pointers you may need.

The USS itself will also be able to give details of your OH's partcular details - the pots, the salary sacrifice etc - by calling or via its message facility on MyUSS.

Snozzle

Thank you both for your comments. I will digest your comments in the early morning tomorrow when I get another couple of hours without youngsters.

He has been in th USS for over 25 years. I remeber making him set up additional contributions to allow him to retire at 60, only to receive a letter saying not allowed any more and either the contributions were returned or moved to AVC's - I can't remember. He does have an Investment Builder element & MPAVC's with Prudential so I will look at those. We stopped the AVC's when he couldn't retire at 60 any more on a full pension.

Re the retiring earlier. I presumed he would stop working at 60 (if I can persuade him) and we would use the funds in the private SIPP to live off till he claimed a pension at 67 but perhaps I have this all wrong!!

DRS1

Re the retiring earlier. I presumed he would stop working at 60 (if I can persuade him) and we would use the funds in the private SIPP to live off till he claimed a pension at 67 but perhaps I have this all wrong!!

Maybe not. I think the tax free cash benefit of the Investment Builder depends on taking it at the same time as the Retirement Income Builder. So if your OH was going to put that off until 67 (or 63.5 as mentioned above) then you may still find the SIPP useful for covering the period from 60 to 67 (or 63.5).

Snozzle

He has no plan whatsover / can't sit down and think / plan ahead hence after at least 10 years on and off asking / encouraging, enough is enough and I need to work out whether I give him a significant amount to either pay into his SIPP with Standard Life which is what I have been doing over these last years or, now that I have access to his myUSS, I encourage him instead to restart the AVC's / do something else, but ultimately sit down together with the info and say…. these are the options, how much you would get if you stop working at x years, y years, z years and make a decision. We have been floundering for years and it will just continue if I don't intervene. He has worked out that reducing his hours / days is not an option as he is paid to get the work done so would get paid less for the same amount of work (and possibly have to go in on his days off). I will look into this 63.5 years, ask if he can authorise me to ask questions on his behalf, and look at the Investment Builder and how it works.. Thanks

Universidad

"He has worked out that reducing his hours / days is not an option as he is paid to get the work done so would get paid less for the same amount of work (and possibly have to go in on his days off)."

There are things I miss about working in the University sector, but the pervasive unpaid overtime is not one of them.

MankyVegSoup

Have you looked at how the pensions you have accumulated to date stack up in relation to the income you want? With 25 years in USS plus all the rest you may already have enough for a comfortable retirement, even if you you both stop working at 60. In which case I would stop the AVCs and book a holiday - but that's my personal priority!

What I have done (OH is in USS) is build a range of spreadsheets with lots of different scenarios from retiring this year (58 but out of contract in June) to staying on to 67.

I find it really useful to have these scenarios so that if life bites you in the bum you know you have options. USS lets you model different leaving and taking pension dates which makes it easier (although I'm not always 100% convinced by their calculations).

Snozzle

Thanks both. I haven't had a second to digest any more other than the couple of hours very early yesterday morning. I will phone the USS tomorrow and see if I can ask questions on his behalf firstly. Spreadsheets are what I have asked in the past for him to do but never happened.

I think that is what I need to find the time to do. He is out of contract at the end of this month (I believe) but hasn't had notice and over the years I have come to realise I can't force him to be proactive - what will be will be.

Having said that, I hope to show him the above comments and ask him to help with the spreadsheets as he will be far better at that than me. Having played around with the modeller yesterday, I do also wonder about all their calculations.

A holiday would be lovely, but we stil have youngsters needing ferrying around - hence why I can only do this early morning / late at night.

LHW99

Have you a) checked both your state pensions to check you will get the full amount (read all the page, not just the headline

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

b) how much will the survivor have to live on when one passes? It sounds as if you may have a lower provision than him, and if so may be worth trying to equalise things, as you can take out £12570 pa without paying tax (if that's your only income) between retiring and SPA, if your SIPP has sufficient.

Snozzle

Thank you. That is the one thing I have done - though I am currently awaiting my pension provider to assess my case as my State Pension Forecast is not correct. Still a 2 - 3 week wait but can always backdate my NI contributions for this year if needed.

And this is perhaps why I am the one trying to resolve it all. He has worked continually since University. I have done all the running around after all our children (still do). I will receive 50% of his pension should anything happen to him. He gets to keep 2/3rds of my work pension (though small). I have significant life cover in place. My pension will be a sixth of his. I am erring towards suggesting that, for tax reasons, I do give him the cash to invest in his pension to bring him just below the higher rate tax threashold but suggest we draft a letter saying that should anything happen between us, pensions are split 50/50.

I do have other income resulting in me getting a tax bill each year when I complete a self assessment. Deflecting from getting him to plan a retirement age but I should perhaps focus more on ISA's to reduce the tax burden in future years.