Pension query.
Discussion
Hi all,
First time posting in here as starting to look to the next few years and not really that clued up on pensions really.
My main query I have at the moment is whether or not my plan is sensible or not or if it may come back to bite me in years to come.
I will be 55 in March 2026 and aim to retire as early as I can but realistically it will be probably close to 60.
Shift work and getting old is not a great combination!
Anyway.
I have 2 pension schemes.
First one is my DB scheme that was provided by my company and paid into from 1989 until the scheme was disbanded in April 2018.
This was paid into under the Plan 65 scheme. Money was very tight back when the choices were made so was unable to contribute to a plan 60 or 55.
My second and active pension scheme has run from April until the present time and is with Aviva and is a DC scheme.
I put in 6% and my employer puts in 15%.
Looking to the future at 60 then as of today with leaving things the way they are then.
DB scheme will pay out £16,000 per year for life or £12,500 with £80,000 tax-free lump sum.
DC Scheme will pay out £14,000 annuity or £15,000 drawdown. Or £10,000 annuity or £11,000 drawdown with a £60,000 tax-free lump sum. (all approx figures)
Not looking to touch my DC scheme until 60 but I have a rough plan at 55 and would like to know if this would work...
Is it possible to take my DB tax-free lump sum at 55, in 13 months time, but leave the rest invested until 60?
This would work out at £67,000.
I would use this to pay off the mortgage in March 2026. This would be roughly £25,000
I would use this to pay off a couple of small loans that we have, roughly £15,000 by then.
And would like to help out both kids to help out with their housing cost, daughter and partner looking to upsize and my lad should be looking to move out and rent maybe.
The peace of mind of having no mortgage and no debts would be a huge bonus for us.
With my employer adding 10% to all my extra contributions I would look into contributing another £1000 a month into my DC scheme.
At current forecast at age 60 this looks like £18,000 annuity or £20,000 drawdown. Or £14,000 annuity or £15,000 drawdown with £80,000 tax-free lump sum.
Our plan is also the closer we get to 60 we want to move away from Surrey to Hereford/Shropshire/FoD area and downsize and get back to a more country and slower pace of life.
Looking a property prices this could free up roughly £200,000.
This would see me with £280,000 "cash" at 60 with a combined pension of £27,000 at 60 with no debts or mortgage if taking the DC tax-free.
Or see me with £200,000 "cash" at 60 with a combined pension of £32,000 without taking the tax-free from the DC.
Sorry for the waffle and I have probably missed something glaringly obvious but thanks for reading.
TLDR, is taking a tax free lump sum out of my DB pension early to pay off mortgage and debts a good or bad idea!!
First time posting in here as starting to look to the next few years and not really that clued up on pensions really.
My main query I have at the moment is whether or not my plan is sensible or not or if it may come back to bite me in years to come.
I will be 55 in March 2026 and aim to retire as early as I can but realistically it will be probably close to 60.
Shift work and getting old is not a great combination!
Anyway.
I have 2 pension schemes.
First one is my DB scheme that was provided by my company and paid into from 1989 until the scheme was disbanded in April 2018.
This was paid into under the Plan 65 scheme. Money was very tight back when the choices were made so was unable to contribute to a plan 60 or 55.
My second and active pension scheme has run from April until the present time and is with Aviva and is a DC scheme.
I put in 6% and my employer puts in 15%.
Looking to the future at 60 then as of today with leaving things the way they are then.
DB scheme will pay out £16,000 per year for life or £12,500 with £80,000 tax-free lump sum.
DC Scheme will pay out £14,000 annuity or £15,000 drawdown. Or £10,000 annuity or £11,000 drawdown with a £60,000 tax-free lump sum. (all approx figures)
Not looking to touch my DC scheme until 60 but I have a rough plan at 55 and would like to know if this would work...
Is it possible to take my DB tax-free lump sum at 55, in 13 months time, but leave the rest invested until 60?
This would work out at £67,000.
I would use this to pay off the mortgage in March 2026. This would be roughly £25,000
I would use this to pay off a couple of small loans that we have, roughly £15,000 by then.
And would like to help out both kids to help out with their housing cost, daughter and partner looking to upsize and my lad should be looking to move out and rent maybe.
The peace of mind of having no mortgage and no debts would be a huge bonus for us.
With my employer adding 10% to all my extra contributions I would look into contributing another £1000 a month into my DC scheme.
At current forecast at age 60 this looks like £18,000 annuity or £20,000 drawdown. Or £14,000 annuity or £15,000 drawdown with £80,000 tax-free lump sum.
Our plan is also the closer we get to 60 we want to move away from Surrey to Hereford/Shropshire/FoD area and downsize and get back to a more country and slower pace of life.
Looking a property prices this could free up roughly £200,000.
This would see me with £280,000 "cash" at 60 with a combined pension of £27,000 at 60 with no debts or mortgage if taking the DC tax-free.
Or see me with £200,000 "cash" at 60 with a combined pension of £32,000 without taking the tax-free from the DC.
Sorry for the waffle and I have probably missed something glaringly obvious but thanks for reading.
TLDR, is taking a tax free lump sum out of my DB pension early to pay off mortgage and debts a good or bad idea!!
PistonHead007 said:
You cannot take the DB tax free lump sum without also starting to receive the annual pension. If you do this before the normal retirement age there will be an early retirement factor applied.
I was under the impression that it is possible to take the tax free lump sum whilst not touching the remaining 75%.I have emailed my pension scheme and waiting for their reply.
Cheers
Edited by nessiemac on Monday 10th February 19:26
Jasey_ said:
nessiemac said:
PistonHead007 said:
You cannot take the DB tax free lump sum without also starting to receive the annual pension. If you do this before the normal retirement age there will be an early retirement factor applied.
I was under the impression that it is possible to take the tax free lump sum whilst not touching the reaming 75%.I have emailed my pension scheme and waiting for their reply.
Cheers
I am 100% sure.
You can release just the 25% TFC on the DC pension by putting the other 75% into drawdown (and then not taking any withdrawals).
The point to understand is that to take the 25% you have to do something with the other 75%. On a DB pension there is no option but to have the annual income.
You can release just the 25% TFC on the DC pension by putting the other 75% into drawdown (and then not taking any withdrawals).
The point to understand is that to take the 25% you have to do something with the other 75%. On a DB pension there is no option but to have the annual income.
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