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Old 19 Feb 20, 06:37 PM  
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#51
tspill
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Originally Posted by Loftus View Post
Ta.

I'm seeing a Pension Wise advisor soon as the next decision is how to take the DC pension. Some form of drawdown or UFPLS. Luckily I have time to decide.

And I'm planning to retire at the end of Mrach 2024 for that reason.
Depending on the individual you get, PW can be hit and miss. Many of them are retired advisors and can be a wealth of knowledge and experience. Some very young and just have text book basics to work with.
They can generally give you generic type information. If you have all your financial details with you, they may also be able to give you a better steer.

My OH is getting a one hour free with a local IFA. This is first thing in the morning. Check if your employer or union offers this.
My employer offered sessions with a company called Wealth at Work. My OH's is through her union.

It might be worth seeing an IFA. Many people refuse this because they can charge a bit. But that cost might be offset many times over as you likely have a few decades of time for the cost of advice to pay back.
Or spend the time learning your self. I find it fascinating so that's what I did. I used an IFA initially, learnt from that and much reading.
The advantage each of us has is that we only need to learn the bits relevant to our individual circumstances. An IFA has to learn about every persons' circumstances and many other things.

Edited at 06:42 PM.
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Old 19 Feb 20, 07:35 PM  
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#52
Loftus
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Originally Posted by tspill View Post
So the first thing to check is what is available from your current employer as regards additional contributions.
There are a number of things that impact the way forward -
1. Are you currently paying into your DB pension? Or like many employers - that have closed their DB scheme and are now paying into a company DC scheme?
2. Some occupational DB schemes also have an associated DC scheme running along side where you can make Additional Voluntary Contributions (AVCs)? Does your scheme allow this.
3. If not AVCs foes your company allow ant contributions to a DC scheme via Salary Sacrifice? This is key as salary sacrifice allows you to get National Insurance relief as well as tax relief as the payment is taken direct from gross salary.

Once you have explored company options - and assuming there are none. The next stage would be some sort of personal pension (SIPP is an example that is widely used these days).
A SIPP can be opened with many organisations banks and Investment platforms.
As you are talking very short term in financial terms, I would suggest you want to hold this in a deposit type account and not invest it as the risks might be too high (usually looking at least 7 years invested).

This is exactly what I am going to set up for my OH.
She has six years until she will take her DB pension.
We are going to set up a SIPP (probably tomorrow) and contribute into this for this financial year and 2020/21 and 2021/22.
While I will make my final choice probably tomorrow, it is likely going to be done through the Halifax where they offer 0.75% interest on cash. Fees for under £50k are £22.50 / quarter. Holding cash in SIPPs is very poor for interest rates and you pay fees. BUT you add the 25% uplift in and it is fine for a couple of years.
The plan is in financial year 2022/23 to take the 25% tax free plus £12500 tax free sum (assuming it doenst change). Then take the £12500 for the two tax years after that. She will need to pay tax on the rest.
After that she will take her DB pension and be a tax payer again.
And she will pay the £2880 into a pension form then on (as I will be doing from next year). As tax payers we will gain £180/year each from this for as long as it lasts.

All the above is dependent on budgets and what they do with pensions.

Not sure if this makes sense?
The DB was closed ten years ago. I have just over 27 years pensionable service in it so the DB is enough to live comfortably.

I have been paying into the DC for ten years. It is done by salary sacrifice, I and my employer both contribute 10% of my salary. All things behind equal by the time I want to retire there should be just north of 140k in it.

Then 2 and a half years later there the DB. Take the lump sum, pay off the mortgage and bank the remainder.

I'm seeing Pension Wise not because I'm two years out so there's plenty of time to seek further advice if necessary.

Edited at 07:38 PM.
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Old 19 Feb 20, 07:53 PM  
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#53
tspill
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Originally Posted by Loftus View Post
The DB was closed ten years ago. I have just over 27 years pensionable service in it so the DB is enough to live comfortably.

I have been paying into the DC for ten years. It is done by salary sacrifice, I and my employer both contribute 10% of my salary. All things behind equal by the time I want to retire there should be just north of 140k in it.

Then 2 and a half years later there the DB. Take the lump sum, pay off the mortgage and bank the remainder.

I'm seeing Pension Wise not because I'm two years out so there's plenty of time to seek further advice if necessary.
Salary Sacrifice is fantastic. Especially if a basic rate tax payer as National Insurance is 12% (I think). By my maths that actually gives you a 47% top up / uplift rather than 25%. Plus your company give you 10%.
In your circumstances I think I would be putting as much as I possibly could into this and living from savings of you have them.
That is what I did for a few years before retiring.

The trick here is working out how to take all this pension out in the most tax efficient way. For example, many have come across actuarial reductions on a DB pension for taking it early (often around 5% per year). But some (mine included) allow an actuarial increase for delaying. Might be worth finding this out. If you can do this it would be worth doing the sums to see if delaying your DM pension and using another year's tax free allowance to take from your DC pensions works out better.
I am doing the reverse and taking my DB 5 years early as the actuarial reductions were changed to 3% per year. Makes it a no brainer for me.

This is one of my big questions about my OH's pension - actuarial increases. I suspect her scheme doenst allow this - but I will know tomorrow.
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Old 19 Feb 20, 08:07 PM  
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Loftus
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My DB provider has a website that gives me projections for what I'll get based on whatever dates I put it. I realise these are guesstimates but it gives me something to go on.
There is a reduction for taking the DB before 63 (actually a month after I'm 63). It doesn't allow for projections after that unfortunately but if it gets to somewhere close I'll be okay, with the remainder of my lump sum and the remainder of the DC to supplement it.
Then four years later I'll get the full SP on top.
I'm happy with my DB contributions at the level they are and the differences in how to take the DC don't appear to be massive. It's all about deciding really.
Many thanks for your responses, it's very interesting if s little confusing.

Edited at 09:23 PM.
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Old 19 Feb 20, 08:55 PM  
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Loftus, just one thing to mention re making further contributions to the DC plan - you just need to ensure you have only made withdrawals of the tax free cash element, otherwise you will be subject to a hefty reduction in your annual allowance (the amount you can pay in pension contributions in any tax year and receive tax relief on) Your employer contributions are counted towards this annual allowance, and given the amount being contributed you would likely be restricted should you fall foul of this. It's fine as long as you are only accessing the tax free cash element (either in whole or phased), but should you withdraw anything else from the crystallised element then the reduction will kick in.
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Old 19 Feb 20, 09:03 PM  
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Originally Posted by Pumba75 View Post
Loftus, just one thing to mention re making further contributions to the DC plan - you just need to ensure you have only made withdrawals of the tax free cash element, otherwise you will be subject to a hefty reduction in your annual allowance (the amount you can pay in pension contributions in any tax year and receive tax relief on) Your employer contributions are counted towards this annual allowance, and given the amount being contributed you would likely be restricted should you fall foul of this. It's fine as long as you are only accessing the tax free cash element (either in whole or phased), but should you withdraw anything else from the crystallised element then the reduction will kick in.
Hi Pumba. Can I check if this the allowance reduction to £4000 (from £40000)?
Is this a hard limit or can you still use unused carry over from previous years?
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Old 19 Feb 20, 09:19 PM  
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Originally Posted by tspill View Post
Hi Pumba. Can I check if this the allowance reduction to £4000 (from £40000)?
Is this a hard limit or can you still use unused carry over from previous years?
Yes, As far as i am aware you can carry forward for the unused allce for the 3 previous tax years. To effectively mop up

Dont forget you need income in the was is CURRENT tax year to be able to do this

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Edited at 09:21 PM.
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Old 19 Feb 20, 09:20 PM  
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Originally Posted by tspill View Post
Hi Pumba. Can I check if this the allowance reduction to £4000 (from £40000)?
Is this a hard limit or can you still use unused carry over from previous years?
That's the one - the Money Purchase Annual Allowance.

My understanding is, once the MPAA is triggered, you also lose the ability to carry forward - which makes sense, given its purpose.
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Old 19 Feb 20, 09:22 PM  
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Loftus
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Originally Posted by Pumba75 View Post
Loftus, just one thing to mention re making further contributions to the DC plan - you just need to ensure you have only made withdrawals of the tax free cash element, otherwise you will be subject to a hefty reduction in your annual allowance (the amount you can pay in pension contributions in any tax year and receive tax relief on) Your employer contributions are counted towards this annual allowance, and given the amount being contributed you would likely be restricted should you fall foul of this. It's fine as long as you are only accessing the tax free cash element (either in whole or phased), but should you withdraw anything else from the crystallised element then the reduction will kick in.
Once I start withdrawing from my pension I will not be making any further contributions. Thanks for the advice.
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Old 19 Feb 20, 09:27 PM  
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Originally Posted by disney332 View Post
Yes, As far as i am aware you can carry forward for the unused allce for the 3 previous tax years. To effectively mop up
I don't believe this is the case when you are subject to the Money Purchase Annual Allowance
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