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Where Taxpayers and Advisers Meet

Should I opt out of my DB scheme?

Andrew9999
Posts: 29
Joined: Wed Aug 06, 2008 4:01 pm

Should I opt out of my DB scheme?

Postby Andrew9999 » Tue Oct 23, 2018 12:50 pm

I would appreciate comments on my pension position.

I’m in a final salary DB scheme with normal retirement age of 60 and I’m currently 56.
I also have AVCs through my employer’s scheme but I stopped contributing some time ago as I had exceeded the LTA.
I have Individual Protection giving an LTA of £1.5m.
Current value of plan (DB plus AVCs) is around £1.7m.
I exceed the 150k annual input limit for tapering (after adding DB input calculation). I expect my salary to remain unchanged (no inflationary increases) until retirement. My marginal tax rate is 40%.
Due to the (standard) way my DB plan operates, I have exceeded the annual input limit in 2017/18 by about 30k (after using the small remaining balance available to carry forward). I have to pay the tax liability on this but fortunately my DB scheme operates a “scheme pays” option so I will use this and accept the related reduction in pension. This has the benefit of reducing my LTA liability.
In the current year I expect to exceed the input limit again and the value will continue to increase so increasing the LTA liability.
I do not wish to stop work now and would prefer not to take an early pension. Estimated retirement age 63.

The decision I have to take is whether to opt out of the DB Pension Scheme. My contribution is 5%.

I’m happy to pay for an IFA if appropriate but I think this may be a “no-brainer” and I should immediately opt out of the scheme. This post is to see whether others agree.
Comments welcome, including any other options I have not considered. Thanks in advance. Do ask for any other relevant facts I have omitted.

Andrew9999
Posts: 29
Joined: Wed Aug 06, 2008 4:01 pm

Re: Should I opt out of my DB scheme?

Postby Andrew9999 » Tue Oct 23, 2018 4:04 pm

I have just realised I have omitted a crucial piece of information.

If I opt out of the fund my employer will pay me a cash allowance of 17.93% of pensionable salary (about 17% of gross pay) subject to normal tax and NI deductions, of course.


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