Is there still a case for cummuting pension

nearleyretired · 19 January 2009 at 10:32AM

I am near either retirement or redundancy.

In the current credit crisis is it still advantageous to convert pension into a tax free lump sum? I would want a "safe" Investment for the lump sum.

I calculate that a £100000 lump sum costs £5840pa (after tax) in salary. i.e. that I would have to make more than 5840 pa in something safeish. to gain. - Or are there other considerations?

Also I have AVCs via a company pension in L&G cash fund - does anyone know where I can find the performance of that fund?

Thanks in advance.

MikeJones_2 · 19 January 2009 at 11:45AM

Hi nearlyretired,

There are lots of factors to consider in what you have posted and really a visit to an IFA would be the best course of action because you will have circumstances specific to your own situation so we can only post generic responses to what you have asked.

For example, we don't know your financial situation, your marital status, your health, your attitude to risk, your views on guarantees, etc.

You might be interested in this though:
- 10 reasons why you may not want to take that cash lump sum from your pension

This serves to demonstrate just some of the issues that you need to consider.

Hope this helps - if only to get you realise the plethora of factors that you need to take account of in making your decision to draw a cash lump sum.

The same goes for redundancy - how many years service have you accrued (and can you confirm what type of pension scheme your current employer provides).

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

Andy_L · 19 January 2009 at 12:35PM

nearleyretired wrote: »

I calculate that a £100000 lump sum costs £5840pa (after tax) in salary. i.e. that I would have to make more than 5840 pa in something safeish. to gain. - Or are there other considerations?

The pension will be increasing annual by RPI (possibly with a cap) so you'd have to make more than £5480 to make up for that, unless you are happy to eat into the lump sum.

nearleyretired · 19 January 2009 at 3:52PM

nearleyretired wrote: »

I am near either retirement or redundancy.
Also I have AVCs via a company pension in L&G 'cash' fund - does anyone know where I can find the performance of that fund?

If anyone can find a link - I would be grateful.

nearleyretired · 19 January 2009 at 4:00PM

MikeJones wrote: »

Hi nearlyretired,

There are lots of factors to consider in what you have posted and really a visit to an IFA would be the best course of action because you will have circumstances specific to your own situation so we can only post generic responses to what you have asked.

For example, we don't know your financial situation, your marital status, your health, your attitude to risk, your views on guarantees, etc.

You might be interested in this though:
- 10 reasons why you may not want to take that cash lump sum from your pension

This serves to demonstrate just some of the issues that you need to consider.

Hope this helps - if only to get you realise the plethora of factors that you need to take account of in making your decision to draw a cash lump sum.

The same goes for redundancy - how many years service have you accrued (and can you confirm what type of pension scheme your current employer provides).

Mike

Thanks I am talking to an IFA but I thought I would canvas a few more views.

I was just trying to get a general answer as to whether the commutation rate was good. and were there was of making sure that an (eventual) return on the investment would make it worth while.

I realise now that this is quite complex and needs a bit of consideration - thanks for the link it makes one think.....

MikeJones_2 · 19 January 2009 at 4:01PM

nearleyretired wrote: »

If anyone can find a link - I would be grateful.

Best I could get was this - but you need to check whether it's the relevant fund that your AVC is invested within:

- Stakeholder Pension and/or Personal Pension Plan: Legal & General
Pension Cash Fund (pdf-3 pages-141KB)

Perhaps one of the IFA contributors may be able to help.

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

Is there still a case for cummuting pension

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