OPEN MARKET OPTION ? or stay where I am ? Advice appreciated

Fountaine

Hi there, we are not talking mega bucks here, but

I have had a pension festering since the late 80s when a boss browbeat everyone into joining but then didn't contribute. I have never been in a position to make additional contributions and it has often felt like a millstone.

Due to circumstance, unexpected loss of job, only income £63.75 IB I am really struggling financially and running up my bank overdraft daily.

I have decided to take the tax free lump sum of around £7k as I need to order oil for my heating and replace my washer which has started eating my best clothes ! Option 2 is to leave the residual cash with L & G which should give me the princely sum of around £1400 per annum when I retire (probably next August). Option 3 is that I take the cash free sum and exercise my open market option and take residual cash which is only about £30k to see if another market provider can improve on that for me.

I am aware that paid for inde advice will result in charges which will be deductred from anything I gain, but does anyone have any thoughts ?

Also re income support, how do benefits view £1400 a year coming in when assessing such things as council tax benefits ?

Thanks everyone

EdInvestor

There is a third option: take the 25% tax free cash and leave the rest invested to grow and be taken as a pension later.Could well suit you as you can also vary the income in drawdown from zero to 120% of the annuity rate, so that might help keep within benefit limits rather than something more inflexible like an annuity.

To do this you would need to put the pension into "income drawdown", usually in a SIPP. These providers arew favoured: https://www.h-l.co.uk
https://www.sippdeal.co.uk

You can do the transfer yourself to these two, no IFA required.

Fountaine

thanks Ed, I'll certainly have a look at that. Every good wish

dunstonh

The FSA have recently fined a firm for doing income drawdown cases on values less than 100k for people that didnt have sufficient other income. It appears the FSA is still a bit anti-drawdown unless you have the money to cover the potential losses.

So, you need to consider what Ed is suggesting is classed as a high risk transaction.

EdInvestor

dunstonh wrote: »

It appears the FSA is still a bit anti-drawdown unless you have the money to cover the potential losses.

They are against advisors misselling drawdown quite rightly.

If you do it yourself this is not a problem.

Fountaine

the loaded question ..... what would you do ? Also as a women who has worked all her life and paid a full stamp, apart from a brief period of redundancy (2004) and illness (1993). I lost my job in April this year and have been on IB ..... should I get close to a full state pension ? the amounts people say they will get on this forum seem to vary widely. from £102 to £200+ per week

I think in the whole of my working life I missed one year of contributions and was well p'd off as I was out of the country for three months, (1986) so had paid 9 months contributions for that year but they struck it off and I was too late to make it up (apparently!)

jem16

EdInvestor wrote: »

If you do it yourself this is not a problem.

No it's no problem to blame yourself if you suffer losses.

EdInvestor

Fountaine wrote: »

should I get close to a full state pension ? the amounts people say they will get on this forum seem to vary widely. from £102 to £200+ per week

That's because there are 2 state pensions, the basic and the earnings related S2P.

Check what you will get here:

https://www.thepensionservice.gov.uk

dunstonh

They are against advisors misselling drawdown quite rightly.
If you do it yourself this is not a problem.

So, its wrong if an adviser recommends it but if you do it yourself its not?

DIY is there for people with knowledge to transact without advice. Not for people without knowledge to be encouraged to enter into a risky transaction that probably isnt suited for them.

The transaction carries the same risks whether you do it yourself or you get advice. The only difference is that the IFA can be done for mis-selling whereas you cant. If you understand the risks and still do it then that is fine.

EdInvestor

jem16 wrote: »

No it's no problem to blame yourself if you suffer losses.

My suggestion would simply enable the OP to take out the TFC - which she needs- and leave the rest in much the same sitiuation as now.There's no reason why she should suffer more (or less) losses than currently if she reinvests the 75% in the same way.

There's nothing inherently unsafe about drawdown, it's entirely down to the way it's invested and how much income you take.You can leave it all in cash, or in a gilts portfolio if you want, and it will be safer than an ordinary pension.

Fountaine, how old are you, when is your state pension due?

Fountaine

Apologies, Daisy The Rescue Dog needed a quick walk,then we did a dash to the supermarket to get some chicken ! No wonder I'm broke. ( and I admit to watching the last ten minutes of Eggheads !)

I am 60 next August, and pension is due on 6 August. I fell about one month on the side of retiring at 60, although I would like to go beyond - Unlikely as at my age, built like a wheelie bin, and with a dodgy dismissal (tribunal pending) my employment prospects are limited ! Hey Ho!