Planning for the future if you're no longer paying in to USS

Read our top tips on making a financial plan for your future

There’s a lot to consider, and what you do now could have a big impact on what happens once you’ve retired.

Top tips

You may have been working for a long time and its nearly time to enjoy the fruits of your labour. But before you can do that, and in order to get the most from any pensions you’ve built up, there are things you should do now. It’s time to give some serious thought to a financial plan and how saving for retirement fits in with this.

You have benefits within USS, so it’s worth reviewing where you are at, what you need and coming up with a basic financial plan.

1. Look at what you’ll need

First thing to do is look at what you’ll need when you retire, the PLSA retirement living standards gives you an estimate of the kind of income you’ll need when you retire, based on what lifestyle you want.

2. Look at what you’ve got

You’ve made some contributions into the Retirement Income Builder, the defined benefit part of USS. Even though you’re no longer paying into USS, the Retirement Income Builder provides you with a guaranteed income for life and a tax-free lump sum (up to HMRC limits) when you retire. For every year you paid into USS you built a block of pension based on an accrual rate used at the time you were paying into USS. The pension you built up has been banked and increases in line with inflation (subject to certain caps), giving you an element of inflation protection.

Members who are paying in to USS will also get life cover. This means your beneficiaries may get a lump sum of three times your salary and a pension too. So, your USS pension will also help take care of loved ones. If you left USS but are still in USS-eligible employment, you can rejoin and regain this benefit (subject to certain criteria). Find out what benefits your loved ones could get while you're not paying in to USS.

To get an estimate of what your pension might give you when you retire, log in to My USS and use the Benefit Calculator.

It’s a good idea to also review any other pension benefits you have outside of USS and when you can start taking them to assist you with your financial planning.

3. Your flexible savings pot

You may have savings in the Investment Builder, the defined contribution part of USS – which is a flexible savings pot, that you can take as early as 55 (rising to 57 for some members), without retiring. If you’ve either transferred a pension to USS, made additional contributions or earned above the salary threshold you will have paid into the Investment Builder.

Log in to My USS to review any Investment Builder savings you have and to check your money is invested where you want it to be and that your Target Retirement Age (TRA) is right for you. Your TRA is important if you’re in the Do It For Me option because we use this to determine when to start moving your investments to lower risk funds as you get closer to retirement.

To review the options you have with your Investment Builder savings, you can use the Benefit Calculator in My USS.

4. Make a financial plan

Financial planning may sound daunting, but time spent focusing on your finances today could be valuable later down the line.

Start by identifying all your savings goals, not just retirement ones but what you want to achieve as a whole with your money, which might be building a savings pot for your kids, paying off your mortgage or simple lifestyle goals like going on holiday. Then it’s worth breaking them down into short terms goals (what you want to do in the next year), and then beyond that to your retirement.

Once you’ve set your goals, it’s time to prioritise them, and how much you can save towards what you want to achieve.

5. What does retirement look like for you?

Once you know how much you’ll need at retirement and what you’re projected to have by the time you get there, you need to decide what’s best for you. You might decide you want to take all of your USS pension in full when you retire, or that you’d rather do something different. Since you’re no longer paying in to USS, you have to take your Retirement Income Builder benefits by Normal Pension Age but you can take them earlier, if you want to. If you do, your monthly pension will be reduced because it’s likely to be in payment for longer. Visit our factors page for more information. If you have Investment Builder savings, you have some different options: You can start accessing your pot from age 55 (rising to 57, for some members, in 2028) in a variety of ways or you might choose to leave your savings invested. Check out taking your benefits and savings for more information.

If you have savings in the Investment Builder, you can decide to take these savings at the same time as your pension in the Retirement Income Builder, or you can keep those savings invested to take at a later date.

There’s no one size fits all here and it a lot will depend on your personal circumstances. Visit your options at different ages and stages for more information.

Published: 24 October 2024