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    • Madeinireland
    • By Madeinireland 24th May 19, 4:56 PM
    • 72Posts
    • 9Thanks
    Madeinireland
    Pension dilemma
    • #1
    • 24th May 19, 4:56 PM
    Pension dilemma 24th May 19 at 4:56 PM
    I will soon be taking my BT DB pension. Its a sizeable amount so Im OK but Ive put in too much in the way of AVCs over the years so its not working out the way I expected.

    I have a choice as to what I can do with the excess after taking the pension and a sizeable lump sum.

    1. I can convert 78718 of my lump sum to buy additional BT pension. It would buy me 2542 of CPI indexed pension every year for me only. The pension has a 50% spouse benefit so I could convert the sum to buy 2259 pension for me and an additional 1129 for my wife when and if I depart this world before her. She is 52 and I am 58.

    2. Alternatively I can purchase a lifetime annuity on the open market with the 78718.

    I always thought the BT pension reverse commutation conversion was supposed to be poor at something like 31 to 1 but when I checked out an annuity for me as a single life (admittedly as a RPI increasing sum as I couldnt find CPI) it only gave 1564 so it seems much worse.

    Any ideas? As it looks like the lump sum conversion is the best way to go unless I can think of something else.

    Thanks...
Page 1
    • skycatcher
    • By skycatcher 24th May 19, 6:51 PM
    • 47 Posts
    • 29 Thanks
    skycatcher
    • #2
    • 24th May 19, 6:51 PM
    • #2
    • 24th May 19, 6:51 PM
    I'm in that pension scheme and soon to make my decision on the options. I am not in the fortunate position to have AVCs. I have considered commuting some of my lump sum for pension and think I'll stick with the tax free lump sum. Have you considered investing the 78k? If you were to follow the often cited 4% withdrawal rate you could take 3k a year.
    • Thrugelmir
    • By Thrugelmir 24th May 19, 7:24 PM
    • 63,458 Posts
    • 56,277 Thanks
    Thrugelmir
    • #3
    • 24th May 19, 7:24 PM
    • #3
    • 24th May 19, 7:24 PM
    Is your wife still working? Use the lump sum to directly enhance her pension provision.
    The stock market is a device for transferring money from the impatient to the patient. Warren Buffett
    • Brynsam
    • By Brynsam 24th May 19, 7:28 PM
    • 2,012 Posts
    • 1,459 Thanks
    Brynsam
    • #4
    • 24th May 19, 7:28 PM
    • #4
    • 24th May 19, 7:28 PM
    If you were to follow the often cited 4% withdrawal rate you could take 3k a year.
    Originally posted by skycatcher
    Just because something is 'often cited' doesn't make it a good idea....
    • tacpot12
    • By tacpot12 24th May 19, 8:46 PM
    • 2,470 Posts
    • 2,228 Thanks
    tacpot12
    • #5
    • 24th May 19, 8:46 PM
    • #5
    • 24th May 19, 8:46 PM
    Just because something is 'often cited' doesn't make it a good idea....
    Originally posted by Brynsam
    The 4% rule could be too low for UK residents with significant state pension entitlement, 5 - 6% could be more appropriate. My SWR according to Firecalc and cFIREsim is above 6% but I have close to a full state pension and some old DB pension entitlements that I can take without actuarial reduction at 62 and 65.
    The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always check official information sources before relying on my posts.
    • Thrugelmir
    • By Thrugelmir 24th May 19, 9:21 PM
    • 63,458 Posts
    • 56,277 Thanks
    Thrugelmir
    • #6
    • 24th May 19, 9:21 PM
    • #6
    • 24th May 19, 9:21 PM
    The 4% rule could be too low for UK residents with significant state pension entitlement, 5 - 6% could be more appropriate. My SWR according to Firecalc and cFIREsim is above 6% but I have close to a full state pension and some old DB pension entitlements that I can take without actuarial reduction at 62 and 65.
    Originally posted by tacpot12
    What does the investment portfolio consist of to achieve these objectives?
    The stock market is a device for transferring money from the impatient to the patient. Warren Buffett
    • drumtochty
    • By drumtochty 24th May 19, 10:13 PM
    • 245 Posts
    • 133 Thanks
    drumtochty
    • #7
    • 24th May 19, 10:13 PM
    • #7
    • 24th May 19, 10:13 PM
    Unobtainium investments.
    • Madeinireland
    • By Madeinireland 24th May 19, 10:48 PM
    • 72 Posts
    • 9 Thanks
    Madeinireland
    • #8
    • 24th May 19, 10:48 PM
    • #8
    • 24th May 19, 10:48 PM
    Unfortunately I am unable to invest the 78k otherwise I would stick it in a SIPP and do that. The only options it seems are to convert it or buy an annuity sadly, unless someone can tell me otherwise. As this fund is excess AVC’s after taking max lump sum it appears the scheme only allows me to purchase an annuity from that.

    In more detail...

    I have a pension lump sum of around 98k and AVC’s of about 225k

    I can convert 78k of the pension lump sum to more pension and then extract the 225k + 20k tax free or I can take the full pension lump sum of 98k and 147k of the AVC’s tax free and then purchase an annuity with the residual 78k of AVC’s.

    It’s a mystery to me as to why I can’t just transfer the residual AVC’s out to a SIPP as a crystallised fund (as I was told I could do before) - I have asked the pension helpdesk several times and this is the latest answer. I’m not sure how to get any further in terms of the definite answer. I’m so fed up with them now I feel I should just accept it and get on with it.
    • shinytop
    • By shinytop 25th May 19, 6:18 AM
    • 323 Posts
    • 375 Thanks
    shinytop
    • #9
    • 25th May 19, 6:18 AM
    • #9
    • 25th May 19, 6:18 AM
    My scheme was the same. For the residual AVC the choice was an annuity or a taxed lump sum. Because I don't need the max lump sum (and my AVC is relatively small anyway) I'm transferring the whole AVC to a SIPP. I don't know if the inability to transfer crystallised funds is regulation or just scheme rules but that's how it was for me too.
    • Madeinireland
    • By Madeinireland 25th May 19, 7:07 AM
    • 72 Posts
    • 9 Thanks
    Madeinireland
    Hi Shinytop,

    It sounds like we have the same issue and I’m fairly sure it’s scheme rules as I have found a couple of providers so far with a quick check who are happy to accept crystallised funds. The thing is they are not specific about what type of annuity in the documentation ( just says purchase an annuity) so I did think perhaps I could purchase a fixed term annuity for a very short period and then switch to drawdown when that matures. When I mentioned that to the helpdesk guy he is saying now it needs to be a lifetime annuity. Why are they so restrictive?

    Anyone know?

    Thanks...
    • NoMore
    • By NoMore 25th May 19, 7:18 AM
    • 339 Posts
    • 318 Thanks
    NoMore
    https://www.btpensions.net/assets/uploads/documents/AVC-options-leaflet-for-retirement-pack-22-July-website-version-pdf.pdf

    It's all of AVC's for transfer or nothing, no partial transfers according to this. No mention of annuity having to be a lifetime annuity but this is only a summary rather than the full rules.
    • Madeinireland
    • By Madeinireland 25th May 19, 7:40 AM
    • 72 Posts
    • 9 Thanks
    Madeinireland
    Hi NoMore,

    Yes that’s what I am told but as you say no confirmation that it needs to be a lifetime annuity so still no idea why such a restriction.
    • Madeinireland
    • By Madeinireland 26th May 19, 11:35 AM
    • 72 Posts
    • 9 Thanks
    Madeinireland
    I’m having a bit of a rethink on all this now and have looked at extracting the whole AVC out into a SIPP.

    By my calculation I would be 18k worse off in terms of tax as extracting it means I don’t then have it associated with my DB pension and I would have a smaller tax free lump sum (98k lump sum from pension and (225k / 4 ) but I think I really don’t need any more than that.

    The benefits however are that I would have much more flexibility of access to funds which can in the main remain in the pension to grow and a larger inheritance for my kids outside of my estate. Given I am unlikely to extract it all prior to it becoming an inheritance then I won’t actually incur a lot of that 18k tax hit.

    Does anyone think I would be making a poor move? Giving up the benefit of a much larger tax free lump sum seems to be the wrong thing to do but the other benefits seem to be good too.
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