Taking pension entitlement early to reinvest

EdInvestor

Well I'm quite clear now on what she wants to know.Whether or not she was properly advised to commute more of her pension to cash and take it early is a different issue she may want to pursue, but her basic query is how to invest the tax free cash and the pension income now arising to achieve the best possible additional income when she eventually retires in some years' time..

pennyunwise

Retired_I.F.A. wrote: »

Here we are twelve days into this thread and advice is being thrown around left right and centre yet still no one has got a complete picture of the issue.

Edinvestor seems to have all the facts, I'm not sure what else I can add but if you ask me what you'd like to know I'll try to provide the answers.

jamesd

pennyunwise, knowing that you got a correct transfer value calculation and correct information about the benefits you could get now and if you waited are the most significant missing bits from the public discussion. Then those would support an IFA giving advice about what to do and the advice should include details of the critical yield needed on the investments to match the benefits you'd get by not doing this. If those are fine then nothing more to do on that part; if they aren't fine then maybe redress claim against the IFA.

With the money taken from the pension the next things to do are find out how much experience you have with investing and how much up and down variation you'll accept from year to year. Also knowing the critical yield figure from the IFA calculations would be helpful.

Knowing roughly how much other taxable and untaxed income you have now and about any likely or planned changes will help, since tax efficiency is a significant consideration.

pennyunwise

I never received a transfer value calculation.

It was never my intention to transfer the whole pension, simply to identify whether taking early payment and the lump sum would be favourable. (Edinvestor in response 27 has it right.) On the investments front I'm neither a trader or portfolio manager ! :-)

I've dabble a bit in Stocks & Shares and try to read up on funds using websites like citywire etc. I find the whe wealth of info tends to confuse.

pennyunwise

jamesd wrote: »

Also knowing the critical yield figure from the IFA calculations would be helpful.

Knowing roughly how much other taxable and untaxed income you have now and about any likely or planned changes will help, since tax efficiency is a significant consideration.

Critical yield is not a term that the IFA came up with.

I'm in full time employment, a member of my organisations pension scheme (final salary) and have no untaxed income. The income I receive just takes me into the 40% tax bracket.

EdInvestor

pennyunwise wrote: »

The income I receive just takes me into the 40% tax bracket.

Actually that would have been an argument against taking the lower pension early.However it might be balanced out by the tax position after retirement along within the likely higher capital at that time.

Go for the index linked certs then for your cash, the return to an HRT is nearly 10% at the moment

It might be worth seeing if you can increase your present pension contribution a bit to get the HRT situation dealt with.

Retired_I.F.A.

You sadly it seems saw an IFA who was not authorised to conduct pensions transfers as had he been then a TVA would have been done and a critical yield calculated, (probably in excess of 7% p/a). Then knowing that and knowing taking the pension would put you in the 40% tax bracket chances are you would have transfered it, gained with better death benefits, left it all to grow in untaxed funds and had annuity and drawdown options at NRD possibly when only a basic rate taxpayer Now you have an annuity chosen by the scheme and tax free cash to invest in mainly taxable investments (barring you ISA allowance) Not it seems to me as being the best route that was available by far
.

jamesd

pennyunwise, did the financial adviser who advocated this course know that you were a higher rate taxpayer? What did the adviser say about higher rate tax and pensions? [STRIKE]Did the adviser tell you that you could take the lump sum and not take the regular pension income yet?[/STRIKE]

[STRIKE]How are you getting the regular payments? Is it through an annuity from the original pension company or is it from some other company? Are there any health issues (being overweight, smoking or anything else that might affect life expectancy) that affect you - these would normally result in a higher regular annuity payment if they were considered and a suitable annuity obtained.[/STRIKE]

Please take care to preserve any paperwork connected with this that you have.

pennyunwise

It's an awful feeling being told you've made the wrong decision but Thanks anyway.

I guess the readers can all learn from this thread and the pitfalls of not selecting the correct IFA. So, having made a bad decision I need to move on and make the best of what I have.

pennyunwise

jamesd wrote: »

pennyunwise, did the financial adviser who advocated this course know that you were a higher rate taxpayer? What did the adviser say about higher rate tax and pensions? Did the adviser tell you that you could take the lump sum and not take the regular pension income yet?

How are you getting the regular payments? Is it through an annuity from the original pension company or is it from some other company? Are there any health issues (being overweight, smoking or anything else that might affect life expectancy) that affect you - these would normally result in a higher regular annuity payment if they were considered and a suitable annuity obtained.

Please take care to preserve any paperwork connected with this that you have.

They had my full salary details so must have been able to work it out. I was aware before going to the advisor that I didn't have to take pension payment. My pension is simply being paid to me by my previous employer.

Healthwise - Apart from the stress of having made the worst decision of my life, I'm healthy.