Taking pension entitlement early to reinvest

pennyunwise

Ed, The companies I have worked for have contracted out of SERPS and I will have a full state pension so with state pension plus private pension and this one I'll end up paying some tax.

EdInvestor

pennyunwise wrote: »

Ed, The companies I have worked for have contracted out of SERPS and I will have a full state pension so with state pension plus private pension and this one I'll end up paying some tax.

In that case it will may well be worth taking more in tax free cash and reducing the amount of taxable pension. Get all the figures and do some calcs.

MikeJones_2

Hi pennyunwise,

Presuming the pension benefits you describe are valuable to you (i.e. that you're not a lottery winner and therefore you will still rely on the pension benefits you have mentioned to help you in retirement) then what you are considering is too important not to take advice from an IFA.

Whilst the answers on this thread are noble, you need to have a comprehensive pension analsyis done on your benefits. You could consider a full transfer analysis and look at other alternatives.

These analyses would prompt you to consider factors such as:

- risk vs reward
- guarantees
- dependants benefits
- your health, including your family's health history
- your dependants' health
- security of your existing pension
- pension increases throughout retirement
- the advantages and disadvantages of taking a cash lump sum from your pension scheme (and the alternatives).

There are many more considerations to think about regarding your existing arrangement even before you look at the investment alternatives that have been discussed above.

Probably not what you wanted to hear, but I hope my reply helps you to reflect on what you have (and what you may not fully appreciate).

Kind regards,

Mike Jones

I work in the field of Pension Education and Pension Guidance in the UK. I am a current member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with 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.

Retired_I.F.A.

A Transfer Value Analaysis and an IFA's report based on a complete fact find is pretty much essential when one has a retained benefit as very few people can do the maths needed to make the comparisons and even fewer who know all the options best suited to the holder.

EdInvestor

I read the query as relating to whether a reduced pension should be taken early (and the taxed funds reinvested in an ISA) or the pension left to the retirement date and then taken at the full rate.

But maybe the OP is considering a transfer out, in which case a proper analysis would be very wise. Does the OP have a transfer value?

pennyunwise

Ed - That was my question, the intent being that by taking the funds out I could actually do better than leaving them in which seems to be the view of the thread.

The problem I now have is what I can legally do with the tax free £26000. I've spent the last 2 weeks reviewing savings comparison sites and am getting frustrated that I can't simply be able to make an informed judgement. I plan to put the £26k into a fixed term savings account for 1 year and then review what I can do with it next year. The taxed pension payment of ca£250 per month is to go into an ISA but whether that should be Stocks & Shares given the current state of affairs or cash goodness only knows.

Retired_I.F.A.

So you've taken the pension and the tax free lump sum and are re-investing both because the pension in deferment would only grow by 4%.max ?

You dont even know what rate you have to get to beat the defered pension .:rotfl:

pennyunwise

Retired_I.F.A. wrote: »

So you've taken the pension and the tax free lump sum and are re-investing both because the pension in deferment would only grow by 4%.max ?

You dont even know what rate you have to get to beat the defered pension .:rotfl:

That's what I said in the initial point and why I asked if it was a good idea

MikeJones_2

Hi pennyunwise,

Just to settle my curiosity, was you deferred pension benefit from a defined benefit scheme (perhaps a final salary type) as it's not entirely clear from this thread?

Mike Jones

I work in the field of Pension Education and Pension Guidance in the UK. I am a current 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.

pennyunwise

MikeJones wrote: »

Hi pennyunwise,

Just to settle my curiosity, was you deferred pension benefit from a defined benefit scheme (perhaps a final salary type) as it's not entirely clear from this thread?

Mike. It's a defined benefit, normally payable from the age of 60.