Do I HAVE to take an Annuity?

jaybee

I am shortly retiring and have received a letter from my privete pension people. It looks as if I can't take the whole sum in one lump (which I really need to do). It is a very small amount of money as I started it far too late in life and paid in far too little (lacked the good advice of this site in those days!).

Any help would be gratefully received. Thanks.

DavidLaGuardia

The benefits from a private pension have a maximum amount that can be taken as tax free cash. The rest known as the non commutable part must be used to generate an income through purchaing an annuity or (if the fund is large enough to justify the charges) by delaying annuity purchase up to age 75 and taking income withdrawals from a fund that may be varied between a maxium and miniumum amount reset every three years.
Ignoring the latter (as you say you have a small fund) you will have to purchase an annuity,
There are four ways that I can think of where you could increase the benefits though.
1. If your contract is an old style Retirement Annuity Contract (set up before July 1988) the lump sum is callculated according to the income that can be taken (usually 3x max income after taking cash). If you transfer the pot to a modern style pension immediately before taking the benefits (many annuity companies can do this for free) the amount will be 25% of the fund which on current annuity ratesis often higher than what the old contracts allow.
2. If you want more money now set up an annuity that pays annually in advance rather than monthly (the yearly total would be slightly lower though)
3. some annuities offer better rates for smokers, impaired health (such as having had cancer) or manual workers who live up north [so, if you don't already before taking the benefits take up smoking and get a job as a road sweeper in Bolton - only joking!]
4. Shop around. For example most IFAs can get a list of quotes from the market specific to you.

DavidLaGuardia

An accidental smiley cut of the year 1988!

jaybee

Thank you so much for your help. I understand it a lot better now!

deemy2004

I am shortly retiring and have received a letter from my privete pension people. It looks as if I can't take the whole sum in one lump (which I really need to do). It is a very small amount of money as I started it far too late in life and paid in far too little (lacked the good advice of this site in those days!).

Any help would be gratefully received. Thanks.

Afriad so, usually limited to 25% cash, 75% annuity, and with annuity rates so low at the moment, its not going to be much.

jaybee

Thanks Deemy. Looks like I'm going to have to be really frugal - thank goodness for this site and all the helpful people!