are pensions complicated or what

Pal

LittleWoman wrote:

- Thats a matter of opinion! I wish I'd not wasted my and my employers contributions, 15 years paying into a personal pension, only to be worth 75% less than the amount paid in. I should have started a SIPP instead - but of course my IFA did not tell me about them when they were first available.

So what would you have invested in within a SIPP that you didn't invest in within your personal pension?

dunstonh

- Thats a matter of opinion! I wish I'd not wasted my and my employers contributions, 15 years paying into a personal pension, only to be worth 75% less than the amount paid in. I should have started a SIPP instead - but of course my IFA did not tell me about them when they were first available.

A SIPP is a form of Personal Pension. It just has a different range of investments available to insured personal pensions. Of course your IFA (assuming it was an IFA) didnt tell you about SIPPs all that time ago. It would have almost certainly have been unsuitable for regular contributions only starting at zero. The fact you left it in there for 15 years without monitoring it confirms that a SIPP would have totally unsuitable for you. (Ignoring the fact that I cannot recall when SIPPs became available). It also suggested that it is unsuitable for you now, unless you have chosen to start reviewing your investments.

Thats not strictly true - if you have another pension (like say a SIPP) you can move it there

That wouldnt change the amount of paperwork and a SIPP would increase the administration. Transferring is an option but it isnt a solution to what the OP wanted to do.

ManAtHome

dunstonh wrote:

At this time, pensions are also exempt from IHT.

Never realised this - mind you I'm a few years off planning to get the cash back out yet.

So when the rules change next month you could in theory keep the fund, draw out a percentage instead of taking an annuity, then the remainder of the fund would go back into your estate after IHT had been calculated?

The rule change I was think of was that I understand you are no longer obliged to take an annuity at 75. I'm also assuming that the percentage draw will be (income) taxable.

ben2444

so, i know you may think im crazy, but what if i return the next statement saying not at address will they just give up or try and chase me?

i can do without the small amount in there

dunstonh

So when the rules change next month you could in theory keep the fund, draw out a percentage instead of taking an annuity, then the remainder of the fund would go back into your estate after IHT had been calculated?

There is no IHT on the funds whilst they are growing and you havent taken any form of retirement benefit.

However, once you commence your retirement options, the tax man starts getting interested and the Inland Revenue have put in some rules to prevent post retirment options being used to avoid inheritance tax.

EdInvestor

ManAtHome wrote:

So when the rules change next month you could in theory keep the fund, draw out a percentage instead of taking an annuity, then the remainder of the fund would go back into your estate after IHT had been calculated?

The position right now is that you can keep the fund and draw out a percentage instead of an annuity ( this is called "income drawdown") up to age 75. If you die under the age of 75, the fund can be paid out to your heirs/dependants minus a 35% tax charge with no IHT payable.

There is a rule change coming up on the current age 75 requiremnt to buy an annuity.That's being dropped but it remains unclear exactly what the new rules will be on the fund after death.

Quite why they can't just extend the existing pre - age 75 rules beats me. :confused.

margaretclare

EdInvestor wrote:

The position right now is that you can keep the fund and draw out a percentage instead of an annuity ( this is called "income drawdown") up to age 75.

This is interesting. Although I'm a wrinkly aged 70, I'm still paying into a stakeholder pension scheme with Friends Provident. I had planned to let it run until my 75th birthday, 10th August 2010. I want the 25% tax-free lump sum but I'm not at all enthralled by the prospect of another annuity. But according to what you say, I could do 'income drawdown' BEFORE I reach age 75 - could I? After 'A' day next month, that is.

If you die under the age of 75, the fund can be paid out to your heirs/dependants minus a 35% tax charge with no IHT payable.

My fund is assigned to go straight to my dear husband if I die before him, and we're not worrying about IHT anyway - not enough total assets.

Aunty Margaret

LittleWoman_3

dunstonh wrote:

A SIPP is a form of Personal Pension. It just has a different range of investments available to insured personal pensions. Of course your IFA (assuming it was an IFA) didnt tell you about SIPPs all that time ago. It would have almost certainly have been unsuitable for regular contributions only starting at zero. The fact you left it in there for 15 years without monitoring it confirms that a SIPP would have totally unsuitable for you. (Ignoring the fact that I cannot recall when SIPPs became available). It also suggested that it is unsuitable for you now, unless you have chosen to start reviewing your investments.

Once a year I would sit down with my then IFA and discuss Investments and Pensions. We would review the investments, but I found he didn't seem to know much about it. He'd "waffle on " about the cost of moving investments within the funds etc. I did try and get information directly from the pensions company, and even tried to switch funds a couple of time - which they made a total hash of, and despite several requests for confirmation of units & funds held each time this information provided was either not correct or accurate. It was monitored the whole period - so I'm afraid I have no polite way of saying it - but your comment about SIPPs being unsuitable for me is rubbish.

Sipps have been arround since 1989. In the late 90's the monthly contributions into my pension (including my employers contribution) was about £350pm. I had a frozen pension (A S226 pension tranfered on his recommendation early on to a pension bond - not doing anything as it was in a closed fun) which the IFA tried to get me to transfer a 2nd time into the pension. I refused, because I didn't see any benfit for doing so. If he'd suggested the SIPP instead I wouldn't have had a problem with it.

By the way you can start a sipp from Zero. Someone I know started his SIPP with nothing intending to transfer a frozen pension into it. 9 months later the funds still have not been transfered as the employer borrowed money against the pension, and has refused to repay it. Until its sorted nothing can be transfered. (It may take years, as the pension co has admitted that although they have reported the co to the IR, they don't expect them to do anything.). 2 months ago, he got his current employer to agree to pay a monthly dd into it - so he started it after it was Zero for 7 months.

dunstonh

You cannot compare current SIPPs to those available back then. To even consider one for regular contributions starting from zero would have been very expensive to say the least.

EdInvestor

margaretclare wrote:

This is interesting. Although I'm a wrinkly aged 70, I'm still paying into a stakeholder pension scheme with Friends Provident. I had planned to let it run until my 75th birthday, 10th August 2010. I want the 25% tax-free lump sum but I'm not at all enthralled by the prospect of another annuity. But according to what you say, I could do 'income drawdown' BEFORE I reach age 75 - could I?

Sure.You could do it now, no need to wait for A-day. Anyone can move a pension into a SIPP, take the 25% tax-free cash and put the fund into drawdown, as soon as they turn 50. The only change to that will be that from A day, you won't be required to take an income from the fund as you are now.

How big is the fund, Margaret? You'd be wanting to move it to a low cost online SIPP with no annual fee, I imagine.There are 3 which are favoured, it rather depends on what you want to invest the money in as to which is best.

BTW you can take more income out of a drawdown fund than you get with an annuity

This calculatorwill show you how much you could get at the moment.