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hwo to choose a personal pension age
leegate
Posts: 44 Forumite
good morning,
I am thinking of opening a personal person plan and would like to know what sort of factors I need consider when choosing a pension age. does this need to be the same as state pension age, what advantage is there to choose earlier or later than state pension age. is it the earlier the better between 55 and 75?
Many thanks.
I am thinking of opening a personal person plan and would like to know what sort of factors I need consider when choosing a pension age. does this need to be the same as state pension age, what advantage is there to choose earlier or later than state pension age. is it the earlier the better between 55 and 75?
Many thanks.
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Comments
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These days, with a personal pension you generally don't have to specify a "cast in stone" unchangable retirement age. You can decide to retire at any age you can afford to, providing it's after the legal minimum (50 rising to 55 in 2010ish)
The earlir you retire the less time you have to invest your money and the longer the pension has to pay out so you get a "double whammy" reducing the monthly pension payout. Obviously the oposite applies so the later you take the pension the higher the monthly payout0 -
IMH0 it's best to choose the earliest possible age (ie 55 for most people) even if you plan to retire much later. This is so as to avoid any penalties if you do need to take the pension earlier.
Penalties are less of a problem these days as a new stule of investing has developed, but it is still worth giving yourself maximum flexibility as you never know how the rules might change.Trying to keep it simple...
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thank you so much for your prompt replies. it helps me fill in a PPP application form.0
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Its probably best to set it up to the maximum age of 75. This is in case you wish to do drawdown later and it saves you having to make amendments to the pension. There isnt a personal pension or stakeholder or SIPP available today that holds you to that date so there is no reason to show the earliest date.
There are a couple of pension providers who will actually improve the terms slightly with longer terms so giving an age which is too young and unrealistic could cost you if you were to use one of them.
If you dont fancy that then go with your state retirement age which will be between 65 and 68 depending on your date of birth.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
EdInvestor wrote: »IMH0 it's best to choose the earliest possible age (ie 55 for most people) even if you plan to retire much later. This is so as to avoid any penalties if you do need to take the pension earlier.
Penalties are less of a problem these days as a new stule of investing has developed, but it is still worth giving yourself maximum flexibility as you never know how the rules might change.
what a load of rubbish!
if the rules change it wont make any difference what age you choose, much the same as has happened with change from 50 to 55 that comes in 2010.
Agree totally with Dh re deals etc, however IMHO most important thing is to work out what lifestyle you want in retirement and when you want that to happen- then plan accordingly.0 -
what a load of rubbish!
if the rules change it wont make any difference what age you choose, much the same as has happened with change from 50 to 55 that comes in 2010.
I'm sorry but the contractual end of a pension (the Normal Retirement Date -NRD) is quite separate from any Government regulation which might affect what year you can legally take a pension. The contract will take precedent over the regulation.
For instance, a Retirement Annuity Contract will normally carry a Guaranteed Annuity Rate, which will apply when you take the pension at the NRD, let's say you selected 60.If you then turned round and said you wanted to retire at 55, you would likely lose that GAR - and GARs are very valuable, these days.
Equally, With-profits pensions taken at maturity on the NRD are never subject to Market Value Reductions. But if you take them earlier , or later (and not on a revised NRD) you may well be charged an MVR.There are millions of WP pensions around, and care needs to be taken on deferring an NRD for this reason - if you defer at 60, the lifeco will often automatically roll over the NRD to 75, which means you are potentially subject to an MVR if you wish to take the pension at any time over the next 15 years!).
The NRD is also very importnat when something goes wrong as far as compensation and protection are concerned (as many Equitable investors discovered). The state or regulatory retirement age is irrelevant, you will likely get paid at NRD and not before.
I am astonished that an IFA like Whiteflag does not appear to understand this basic fact. Investors should never ignore the contractual nature of their pensions.Trying to keep it simple...0 -
I think the state retirement age is still as early as 60 for some women?
Yeah! Me! (Born in Janary 1950 am am one of the last few who can pick up my State Pension at 60).:D(AKA HRH_MUngo)
Member #10 of £2 savers club
Imagine someone holding forth on biology whose only knowledge of the subject is the Book of British Birds, and you have a rough idea of what it feels like to read Richard Dawkins on theology: Terry Eagleton0 -
For instance, a Retirement Annuity Contract will normally carry a Guaranteed Annuity Rate, which will apply when you take the pension at the NRD, let's say you selected 60.If you then turned round and said you wanted to retire at 55, you would likely lose that GAR - and GARs are very valuable, these days.
The last GAR issued on new business was 1995. We are looking at new business here not existing plans.Equally, With-profits pensions taken at maturity on the NRD are never subject to Market Value Reductions. But if you take them earlier , or later (and not on a revised NRD) you may well be charged an MVR.There are millions of WP pensions around, and care needs to be taken on deferring an NRD for this reason - if you defer at 60, the lifeco will often automatically roll over the NRD to 75, which means you are potentially subject to an MVR if you wish to take the pension at any time over the next 15 years!).
Legacy business again and not new modern contracts.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0
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