Should I take lump sum now or wait to 65??

scottishsue

Hi Guys - As ever your "thoughts" would be appreciated. The new rules regarding pensions come into being in April next year. As I understand it I am 50 in december this year :eek: I have a Pension Scheme with Winterthur life and believe that I can opt to take a quarter out on my 50th Birthday and leave the rest till I am 65 and get an annuity. Now the dilema is that this has never been a great thing the current balance is approx £27,000 with projected pension of £1,830 pa!! I should piont out that my Husband has a very good final salary scheme and we have other investments and are planning on living off that when he retires in 10 years. We have been through the sums. What are your thoughts should I take a quarter now while I can or leave until 65. At least I get some of my money back before it disappears!!!

dunstonh

believe that I can opt to take a quarter out on my 50th Birthday and leave the rest till I am 65 and get an annuity.

You can. Although it does reduce the tax efficiency of the pension and will reduce your benefits on your normal retirement date.

Now the dilema is that this has never been a great thing the current balance is approx £27,000 with projected pension of £1,830 pa!!

The projections are just examples and for some time now, the example incomes have typically shown annuity purchases using lower rates (e.g. spouse included or with indexation). Some also show a 2.5% p.a. deduction for inflation.

I should piont out that my Husband has a very good final salary scheme and we have other investments and are planning on living off that when he retires in 10 years.

Which increasingly suggests that not crystallising the pension (taking benefits) is the right thing to do.

At least I get some of my money back before it disappears!!!

why would it disappear?

McKneff

I should piont out that my Husband has a very good final salary scheme and we have other investments and are planning on living off that when he retires in 10 years

Just because its a final salary scheme now doesnt mean it will stay that way. I paid into one for 12 years and the company then decided it couldnt afford it and changed to a personal Pot. I lost thousands. There will probably be a clause somewhere saying that the company could change it when and if they see fit.
Personally, i would leave it where it is.

Debt_Free_Chick

McKneff wrote: »

I should piont out that my Husband has a very good final salary scheme and we have other investments and are planning on living off that when he retires in 10 years

Just because its a final salary scheme now doesnt mean it will stay that way. I paid into one for 12 years and the company then decided it couldnt afford it and changed to a personal Pot. I lost thousands. There will probably be a clause somewhere saying that the company could change it when and if they see fit.

Only for benefits that build up in the future and only after consultation with the employees - granted, that consultation is unlikely to prevent the company from making the change, but the point is that benefits already built up are "ringfenced" and cannot be reduced/changed. And for so long as the company trades, it must fund those benefits, so it can't claim "not to be able to afford" to fund past benefits.

EdInvestor

scottishsue wrote: »

What are your thoughts should I take a quarter now while I can or leave until 65. At least I get some of my money back before it disappears!!!

What do you plan to do with the money? Reinvestment in your expanded ISA allowance (now over 10k.pa) might be a good idea as then the eventual income generated will be tax free.Otherwise the investment options are much the same. Reducing a mortgage might be another good thing to do with it.

If you want to take the 25% you will probably need to transfer the whole pension to a SIPPand put the fund into 'income drawdwon'. Here are a couple of low-cost providers:
https://www.h-l.co.uk
https://www.sippdeal.co.uk

Then you'll need to choose investments for the remaining 75% of the money still in drawdown in the SIPP. Moving to a SIPP usually gives you access to much better investment options than an ordinary pension, but you do need to pay some attention to it at least in the set-up stage.

jamesd

The change to age 55 happens next tax year so if you do want to take the pension money now then you'd have to do it before then. You can take the 25% and immediately reinvest it in a stocks and shares ISA up to the annual limits. Or you could put it back into pension contribitions and get another chunk of tax relief on it.

McKneff

Debt_Free_Chick wrote: »

Only for benefits that build up in the future and only after consultation with the employees - granted, that consultation is unlikely to prevent the company from making the change, but the point is that benefits already built up are "ringfenced" and cannot be reduced/changed. And for so long as the company trades, it must fund those benefits, so it can't claim "not to be able to afford" to fund past benefits.

So can i ask a question personally.

When my company changed from a final salary every penny that built up should have been transferred from my FA to a money purchase. it is so many years that i dont remember what happened. Should the company have paid for any fees etc in the changeover. And if so could you post me a link regarding this. I cant seem to find anything.

EdInvestor

McKneff wrote: »

When my company changed from a final salary every penny that built up should have been transferred from my FA to a money purchase.

No that's not the case.More likely it is still with the original company, increasing by the inflation rate every year until you retire.Have you contacted them to check?

lilac_lady

I'd take the 25% now because it's good to have some money when you're young enough to enjoy it. If you don't want to spend it, invest it for your retirement.

I realise that it may not be the wisest thing to do but some people have learned the hard way that being wise pension-wise doesn't always pay off.

dunstonh

I'd take the 25% now because it's good to have some money when you're young enough to enjoy it. If you don't want to spend it, invest it for your retirement.

The post suggests there is other money available. Taking the pension now just creates an additional potential tax burden and reduces the ability to take a greater amount later tax free.

It may be that adding to it is the better option. Especially if the retirement planning is too lop-sided with the spouse.

McKneff

EdInvestor wrote: »

No that's not the case.More likely it is still with the original company, increasing by the inflation rate every year until you retire.Have you contacted them to check?

It was with Sun Alliance but now it is with Phoenix i believe. Am due to
claim it in October so think i will do some digging starting now.