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Things an individual can do to maximise their pension

The new changes to our USS pension are very unattractive. There are, however, several things you can do to improve your position at retirement. Here are the ones of which I am aware:

  • Get into a scheme with better inflation protection. The TPS pension, offered by Post-92 Universities has inflation protection at CPI+1.6%; this roughly keeps up with average pay. Currently (but not for long) USS is in the Public Sector Transfer Arrangements, which allow you to transfer your existing USS pension rights into TPS or, for example, the NHS scheme. As shown in my previous post, this really protects your benefits. The downside is that you will probably have to change jobs. I guess you could, for example, move to Solent.
  • Retire a bit. If you were employed and at least 55 on 1st October 2011, you can retire at 60 without penalty. This is a big deal; if you didn’t meet the age cut-off, your pension would be reduced by about 20% for the rest of your life. The really attractive thing to do is to retire 20% (go to a four-day week and, like me, don’t come in on Fridays) and collect 80% of the pension. If you’ve been here a while, you will find that your overall pay goes up, while you work shorter hours. You continue to accrue pension (at 8/10 rate) and when you finally retire you can collect this and your remaining 20%. An added advantage is that your pension is calculated not on your last year’s pay, but on the best three of your last thirteen years, corrected for inflation. If you’ve been at the top of a scale for a while, your pay has not been keeping up with inflation and you will have a pensionable salary which is more than you have ever earned. An unmissable deal.
  • Pay cash AVCs. The Prudential AVCs give a reasonable return but that’s not the real point. They are a way of deferring and eliminating income tax. Money you pay in is paid before tax. You can later take out 25% of the cash value of your pension tax-free. You can take all the rest out too (there is no longer an annuity obligation) and pay tax only at your post-retirement tax rate. Even better, if you have a retirement pension, the total value of your pot is calculated as twenty times your pension plus all the cash (AVCs and USS lump sum); you can take up to 25% of this entire pot tax-free. This right will be lost for future AVCs after April 2016. You should set up AVCs before collecting any pension; the government doesn’t like to see pension money recycled.
  • Don’t forget the various bits of state pension and any other occupational pensions you may have.
  • You don’t ever have to retire. Keep your job as long as you want, and can do, it.
  • Get married to somebody young. USS will pay them for life after you die. Kids (potentially up to age 23) get paid too.

There are a couple of other important benefits which I hope will not affect you.

  • Ill health retirement. If you think this might affect you, do not resign. It is a complicated matter and you need UCU and USS advice before taking any action. If you have only a small pension, your family will be much better off if you stay employed and die “in service”. Resignation also seriously harms your chances of getting an enhanced pension through ill health retirement.
  • You should fill out the “nomination” form from USS. This will ensure that, in the event of your death, your dependent will get some money right away. If you don’t, there will likely be a delay and they might have to pay probate costs before receiving anything.

Denis Nicole

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