Due for retirement

Torchy

Hi I am 63 years old in March 2009 and had planned to retire then but don't think I can afford to, so I plan to carry on till I am 65 in March 2011.
My worry is my personal pension, shall I defer it till 2011 or do you think I will lose more money then than if I took it in March 2009.

dunstonh

My worry is my personal pension, shall I defer it till 2011 or do you think I will lose more money then than if I took it in March 2009

You have told us you have a container but given no indication of what is in that container.

Pensions dont make or lose money. They are a tax wrapper. A container for investments. Its the investments that make or lose money and you have an almost unlimited investment choice nowadays ranging from cash through to speculative shares and everything in between.

Ideally, you would begin to reduce your investment risk as you get closer to your selected retirement age. This only happens on pensions that have that option automatically, you have a servicing IFA that does it as part of the service or your do it yourself.

What are your investments and what action has been taken to reduce the risk?

Torchy

Hi thanks for responding. I have aprox £65,000.00 of which £ 22.000.00 is protected rights and £43.000.00 is non protected rights in a with profit fund. I know it's not much but I want to get the best I can from it.
The above plan value was sent to me just before the credit crunch and I thought if shares went down what I get back will go down. My plan is with Norwich union.
My IFA want's £400.00 to talk to me.

EdInvestor

What is the contractual retirement date on your NU with profits pension? If you do not retire at that date, it is likely you will suffer an exit penalty called a Market Value Reduction and possibly lose any valuable guaranteed annuity rates attached to the policy..

You can take the pension but still keep on working, there's no requirement to stop.The only issue is tax..

Sapphire

Can't one just take the pension and invest the monthly payments one gets?

I have a with-profits pension with L&G that finishes in 2011. I don't suppose it can be extended?

(The pension was actually mis-sold to me and I did get a bit of compensation – though probably not enough given what is happening to such pension schemes.)

dunstonh

Can't one just take the pension and invest the monthly payments one gets?

What would be the point of that? You would be taking it out of the most tax efficient wrapper of all (more than ISA) to put it in something less tax efficient with identical investment options.

There are times it can be worth doing that but what would be your reasoning for doing it?

I have a with-profits pension with L&G that finishes in 2011. I don't suppose it can be extended?

Yes. Commencement age is flexible between 55 and 75. However, it is worth checking legacy contracts (pre 2001) to make sure that certain guarantees and options are not limited to the original selected retirement age. Sometimes if you are going to defer it till later, then transferring it out now or at the original selected retirement age is the best option.

Torchy

EdInvestor wrote: »

What is the contractual retirement date

Torchy

Hi EdInvester, The contractual retirement date on my NU with profits pension is March 2009. I have been told by NU that a MVR applies at the moment and will apply at the end if I extend my date for another two years but it won't apply for March 2009. I was hoping that if I extended it for two years my fund would grow and inevitably I would get a better payout. Would the MVR make that much difference.

dunstonh

You may find that there are other funds available you can switch into in March 09.

swiss69

Another option may be to take the pension in March 2009 and reduce hours at work.

I would certainly make use of the MVA free period in March 2009 even if you just move out of that fund. It is conceivable that at 65, even if your fund has grown the income could be lower. It all depends on annuity rates at the time.

Always seek advice when ready to take the benefits.

EdInvestor

Torchy wrote: »

Would the MVR make that much difference.

In some cases MVRs can reduce pension funds by as much as 30%, so yes it's a major consideration. I would suggest you get some advice about your options. The best thing to do may be something quite simple, to defer the pension but switch the 45k out of the With-profits fund into cash at the NRD. That should avoid the MVR. But be aware that you need to follow the correct procedures in doing this and it is easy to get it wrong.

IMHO it is worth paying the fee for the advice to get this sorted and processed and also to talk about all the other options, including income drawdown , different types of annuities, tax free cash and how to invest it etc.