Pension payments, in advance or arrears?

BlondeHeadOn · 8 July 2012 at 4:35PM

This seems like a daft qustion, but no-one I know seems to know the answer so I'll risk sounding daft on here...

My OH will soon be taking early retirement, but if his retirement starts on e.g. the 1st September, when does he get his first pension payment from his company pension scheme? He thinks it will follow his salary pattern and be paid in arrears (so first payment at the end of September), but to me it would be more logical if pension payments are in advance - after all, it is not a payment for work done.

Also which way does it work for private pensions?

It's relevant because I am trying to work out the budget or the first few months of his retirement.

Thanks!

anmarj · 8 July 2012 at 6:28PM

for company pensions it depends on the individual companies if they pay in advance or arrears, you can give them a call and they should be able to tell you

srcandas · 8 July 2012 at 7:48PM

Blondeheadon not trying to highjack your post and I will be talking tomorrow with two PP providers so will be back with something useful but a supplementary question if I may

If you opt to take your pension annually as opposed to monthly do you:

i) get a little more
ii) get paid after 6 months
iii) get paid at the end of the year with no benefit (but possible reduced bank charges in the future).
iv) get paid in advance as a reward for less transactions - yeah wishful thinking

:beer:

ps my scottish widows is in arrears

dunstonh · 8 July 2012 at 9:22PM

If you opt to take your pension annually as opposed to monthly do you:

i) get a little more
ii) get paid after 6 months
iii) get paid at the end of the year with no benefit (but possible reduced bank charges in the future).
iv) get paid in advance as a reward for less transactions - yeah wishful thinking

i) yes if it is annually in arrears. no if it is annually in advance.
ii) same as above but on half yearly basis
iii) not sure what you mean by that
iv) no

ps my scottish widows is in arrears

Only because you chose it that way. You get to choose things like advance/arrears, with or without overlap, with or without proportion etc.

Debt_Free_Chick · 9 July 2012 at 12:26AM

Pensions are normally paid in advance. They can be in arrears, but this is unusual for an occupational pension scheme. For an annuity, which is bought by the member, it's normally only in arrears if the member specifically requested it.

In 30 years, I've never seen a pension paid in arrears.

srcandas · 9 July 2012 at 6:35AM

Debt_Free_Chick wrote: »

In 30 years, I've never seen a pension paid in arrears.

I quote from Scottish Widows "Your guide to Guaranteed Annuity Rates under your personal pension plus plan"

- is payable yearly, half-yearly, quarterly or monthly in arrears.

But the Prudential for a similar PP is paid in advance.

Neither company offers me a choice in this matter based on the formal documentation they have sent me. Just a choice of payment period.

BlondeHeadOn · 9 July 2012 at 9:03AM

I'm beginning to think that this may not have been such a daft question after all! Obviously it varies.

Right, I will get OH to ask both his company pension scheme and his private pension scheme how they work.

Thanks folks!

:T

dunstonh · 9 July 2012 at 9:31AM

Neither company offers me a choice in this matter based on the formal documentation they have sent me. Just a choice of payment period.

They will send what you ask them to supply. If you dont ask them to supply specifics then they will send default options.

srcandas · 9 July 2012 at 10:43AM

Just a thought being paid a year in arrears may be very attractive as it presumably moves the payment into the following tax year. Thus (under the right circumstances) if you have the cash flow this could reduce tax (even if the benefit would be for your inheritors

jem16 · 9 July 2012 at 10:48AM

srcandas wrote: »

Yes Dunston as often you are right and once again it is an example of hopeless inefficiency by a member of the finance industry. (and some might suggest fraudulent).

Presumably if you were using an IFA, the IFA would sort it all for you and know exactly which questions to ask of the insurance company?

srcandas · 9 July 2012 at 10:56AM

jem16 wrote: »

Presumably if you were using an IFA, the IFA would sort it all for you and know exactly which questions to ask of the insurance company?

And judging on how hard they try and sell such services I'm sure they make sure that is so. Not only that but they notify the IFA 2 weeks earlier than a client?

But with a pot of £2780 I wonder what percentage an IFA would want?

Pension payments, in advance or arrears?

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