Please help!!

LYD14_2

Hi

I am trying to help my mum sort her private pension out as she will be 60 next month. She has totalled up over £18,000. Because this is above the threshold to withdraw all of it she is only being offered £4,000 lump sum with a number of other confusing options! One of them is to take the £4,000 and then move the remaining £14,000 over to a new holder. If she was to this (and would then be under the threshold) would she be able to draw the full £14,000? I have read numerous leaflets and spoken to a few advisers but it hasn't helped greatly so I am hoping this forum will. She will also get a state pension and has a work one which she will either continue or draw as it is under £3,000.

Any advice would be gratefully received.

Lydia

EdInvestor

She can't take the whole amount in cash as it is over the threshhold (the other pension has to be counted in too).

So her options are to take the 4k lump sum and either

1)Take an annuity income from the current provider
2)Take an annuity income from a different provider which hopefully will pay better.Check the pension annuity section here for an idea of current rates:

https://www.fsa.gov.uk/tables

3)Move the money to a SIPP and then put it into income drawdown, where the money stays invested and you take an income from it (or you can leave it to grow and get more later if you don;t need the income right now).

4)If she has any illnesses she could look at an "enhanced annuity" which might pay more.She should consult an IFA for this.

When you say her work pension is 3k, is that the annual pension income, or the total value of the fund?


How much is she expecting from her state pensions?

MikeJones_2

LYD14 wrote: »

...take the £4,000 and then move the remaining £14,000 over to a new holder. If she was to this (and would then be under the threshold) would she be able to draw the full £14,000?

The simple answer is 'no', I'm afraid.

More details available here from HMRC Rules:
RPSM09104910 - Technical Pages: Member benefits: Lump sums: Trivial commutation lump sum: When benefits may be commuted

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. I am not an IFA.

LYD14_2

Thank you for your speedy advice! EdInvestor - I will need to check her state pension calculations but her work one is £3k in total as it has only been paid for a very short time. I think the annual income worked out to be £66 a month if she took the £4k lump sum which for £18K is dreadful! If we had known about the threshold she could have stoped the pension a while ago. Nevermind, we need to just get the best out of it really! I will have a look at your link.

Big thanks again.

hethmar

But I spose Lyd if she had withdrawn it where else could she have received a much larger income for the rest of her life?

Im in a similar situation with my retirement coming up in 18 months and to be honest I dont know which way to turn or what to do as we have been so badly advised in the past by our financial adviser.

Pontebantam

One other point to remember on a pension is that whilst you will pay tax on the annuity at your applicable tax rate when you take it, a pension is the only 'investment' where you get a top up on your contributions from the government, which is even more beneficial for those who are 40% taxpayers.

As I always says, pensions are only part of the financial planning for a client, eggs and baskets spring to mind !

And yes I am an IFA !

Hethmar sadly I've come across your sort of comment on several occassions when I meet someone, as with many businesses, there are those who are out to make a fast buck out of unsuspecting clients, and there are those of us who believe moral and ethical values are extremely important when looking after people's finances and providing advice.

hethmar

Im sure there are good guys Ponte, it just how do you know which is which. Its a great shame as we are in a deal of mess with our investments etc. and Id love to have someone I trusted to sit down and sort it all into an order that will see us in a safe and secure old age but as I said, once bitten ................

asharon

...you get rabies ?

dunstonh

hethmar wrote: »

Im sure there are good guys Ponte, it just how do you know which is which. Its a great shame as we are in a deal of mess with our investments etc. and Id love to have someone I trusted to sit down and sort it all into an order that will see us in a safe and secure old age but as I said, once bitten ................

IFAs account for just 4% of complaints to the FOS and only one third of those are upheld. Yet they transact over half the business. Most issues are historical rather than recent.

Tied agents and salesforces are the ones to avoid. I know the waters have been muddied over the years with it hard to tell who is a real adviser and who is a sales rep (something the FSA has now proposed to make clear again) but its not really that difficult to find a decent IFA and the odds are that you aren't going to get bad advice.

I hope you never see a bad doctor as you wont ever want to fall ill again. You better not get food poisoning as you will have to stop eating then as well