Taking pension entitlement early to reinvest

pennyunwise

jem16 wrote: »

Who is your final salary pension with? For example if it's local government (including teachers) it's 12:1 - not a good commutation rate.

Its with Zurich Financial Services.

pennyunwise

EdInvestor wrote: »

The first point of interest is to work out how many years it would take the OP to "catch up" with the accumulated pension money she has already received if she waited to receive the higher income later.

This is where my mathematical reasoning may break down but....
If I took the benefits at the age of 60 assuming a growth rate of 3% from the pension quoted now (£6,687), the pension payment at 60 would be about £8500. Taking the benefits now and assuming the same rate of growth my pension at the age of 60 will be about £4500 gross.

The cumulative income received (after tax @ 40%) up to the age of 60 would then be about £32,000 and that plus the tax free sum of £26,000 gives the total princely sum of £58,000.

If I had left the pension and taken it at 60 then assuming a starting pension of £8500 and a growth rate of 3% I calculate it would take 5 years to accumulate roughly the same sum.

EdInvestor

How many years are we taking about here, is it 10? Also, you say in your first post you are not a high rate taxpayer.

If you invested your tax free cash at a net return of 6% over the 10 years it would be worth 46,562 when you retired ( and you can get much more than that on index linked certs at no risk) .You haven't accounted for investment growth on the income either.

dunstonh

Its with Zurich Financial Services.

So, you worked for Zurich (or a company now owned by Zurich)? If not, then this would not be a final salary pension scheme but a personal pension or Section 32 buy out bond (I dont think Zurich ever entered into the COMP/CIMP market but if they did it would still be money purchase).

A lot of Zurich personal pensions had heavy front loaded charges (on contribution) but have 0% annual management charge. Often, its near impossible to recommend a transfer of a Zurich pension because they are so cheap (once you stop adding to them) and they have a fund range you can you switch between.

Retired_I.F.A.

Ah ze plot it thickens Yah

Forget about the TVA and wondering why one was never done then as they are basically a tool for comparing a final salary scheme to a money purchase plan.

dunstonh

Forget about the TVA and wondering why one was never done then as they are basically a tool for comparing a final salary scheme to a money purchase plan.

It would also explain why the adviser left it alone.

pennyunwise

dunstonh wrote: »

So, you worked for Zurich (or a company now owned by Zurich)?

I was an employee of ZFS and a member of their pension scheme for 10 years.

Retired_I.F.A.

So was it a final salary scheme then or not? As I'm 99.9% sure the Zuich reps I saw were all in a final salary scheme.

pennyunwise

Retired_I.F.A. wrote: »

So was it a final salary scheme then or not? As I'm 99.9% sure the Zuich reps I saw were all in a final salary scheme.

http://forums.moneysavingexpert.com/showpost.html?p=12648699&postcount=21:confused:

pennyunwise

EdInvestor wrote: »

How many years are we taking about here, is it 10? Also, you say in your first post you are not a high rate taxpayer.

I'm only just into the higher rate tax bracket by a couple of hundred pounds.
It's actualy eight years