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Pension payments, in advance or arrears?
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# 1
BlondeHeadOn
Old 08-07-2012, 4:35 PM
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Default Pension payments, in advance or arrears?

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!
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# 2
anmarj
Old 08-07-2012, 6:28 PM
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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
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# 3
srcandas
Old 08-07-2012, 7:48 PM
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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



ps my scottish widows is in arrears

Last edited by srcandas; 08-07-2012 at 7:51 PM.
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# 4
dunstonh
Old 08-07-2012, 9:22 PM
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Quote:
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

Quote:
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.
I am a Financial Adviser. Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
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# 5
Debt_Free_Chick
Old 09-07-2012, 12:26 AM
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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.
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# 6
srcandas
Old 09-07-2012, 6:35 AM
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Quote:
Originally Posted by Debt_Free_Chick View Post
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.

Last edited by srcandas; 09-07-2012 at 6:39 AM.
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# 7
BlondeHeadOn
Old 09-07-2012, 9:03 AM
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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!

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# 8
dunstonh
Old 09-07-2012, 9:31 AM
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Quote:
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.
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# 9
srcandas
Old 09-07-2012, 10:43 AM
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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

Last edited by srcandas; 09-07-2012 at 10:52 AM.
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# 10
jem16
Old 09-07-2012, 10:48 AM
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Quote:
Originally Posted by srcandas View Post
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?
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# 11
srcandas
Old 09-07-2012, 10:56 AM
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Quote:
Originally Posted by jem16 View Post
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?
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# 12
dunstonh
Old 09-07-2012, 10:56 AM
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Quote:
Originally Posted by srcandas View Post
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.
It may be but then it can also mean less money over the whole term potentially in case you die before the next payment is due.

Ignoring guarantee period/spouse provision. If you select say annually in arrears and then die in month 9, then no annuity payment is ever made if you select "without proportion". if you select "with proportion" then there would be 9 months worth paid out but with proportion would pay a lower annuity than without proportion and that may negate the increased benefit.
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# 13
srcandas
Old 09-07-2012, 10:59 AM
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Sorry accidentally deleted this. It was three/four posts up

Quote:
Originally Posted by dunstonh View Post
They will send what you ask them to supply. If you dont ask them to supply specifics then they will send default options.
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).

Although their documentation says "it is in arrears" with no caveats in reality it is possible to ask for it in advance. So with only 7 weeks notification of a very critical decision (if I do not action the GAR on the specific day it will be lost) I am sent 12 pages of information which is only correct in part and does not offer the options. They offer that I can request various options and each time they will send out the full 12 page pack once again. I mean who gives a !!!! about the planet.

Suggestion:

Payment time intervals: monthly [] 3 monthly [] 6 monthly [] yearly []

Payment to be made: in arrears [] in advance []

Please tick one from each group


Yup a child of 4 could have come up with that. Well beyond the finance industry of course

And I asked Scottish Widows if by being paid in arrears annually I would be paid more. After five minutes while they consulted a technician they said yes but didn't offer how much or how it is calculated. So I will write in again. As Mr Farage would say "You couldn't make it up"

Blondheadon I'd just demand everything you want and let them sort it. The danger is of course that they will screw it up and delay payment but best of luck
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# 14
jem16
Old 09-07-2012, 10:59 AM
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Quote:
Originally Posted by srcandas View Post
But with a pot of 2780 I wonder what percentage an IFA would want?
Ah ok - not worth it unless you have an existing relationship with an IFA. Otherwise I would imagine at least 500 as a fee.
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# 15
Rodders53
Old 09-07-2012, 12:28 PM
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It really does depend on the Scheme (and should be clearly spelt out in the literature and pension illustration statements provided by them to your husband).

Mine is paid monthly, mid month, 1/2 in advance and 1/2 in arrears... the same as when I was employed. Pay date is 1 day later for the pension though.

{Used to be in arrears but when they moved weekly paid staff into monthly pay - in the 80s? - they came up with this mid-month compromise deal, for all}.
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