Pension is a finite amount and not infinite but if you live for a long age

atearth

Right I place X amount into a pension.

I retire and recieve my monthly pension til I die.

Two questions.

Q1. If live for a long time, will it mean eventually I will not recieve any more money from the pension because I used it all up?

Q2. Similar to Q2 but, I die of a very old age and hand over my pension to say grandchild who is just born. Will they eventually stop recieving any more money from the pension because it has been used up?

tomstickland

You buy an annuity which is based on the pension company gambling on how long you will live.

Andy_L

1. No. Assuming this is a private pension at some point you swop £X for an annuity, a guarantee of a monthy income for life

2. No, the payment from the annuity ceases upon your death, unless you accept a lower monthy payment in exchange for it paying out to dependants. Even then that tends to only cover a spouse and/or children

atearth

tomstickland wrote: »

You buy an annuity which is based on the pension company gambling on how long you will live.

Could this term annuity be explained please?

atearth

Andy_L wrote: »

1. No. Assuming this is a private pension at some point you swop £X for an annuity, a guarantee of a monthy income for life

2. No, the payment from the annuity ceases upon your death, unless you accept a lower monthy payment in exchange for it paying out to dependants. Even then that tends to only cover a spouse and/or children

What if the person is with a final salary company pension?

purch

If you buy an annuity.

1) No......the Insurance Company shoulders that risk
2) No......the Pension ends with you (or your partner if you buy a spouse's pension)

If you use Income Drawdown

1) Yes......you shoulder that risk, and if you manage it badly you could run out of ££
2) Yes...the Pension could pass on to your estate, subject to Tax charges.

P.S. One of the clever 'bods' will be along to explain about ASP's etc etc at age 75 if you choose the Drawdown route.

Cazza

"An annuity is an income for life, provided by an insurance company, in exchange for a pension fund or any lump sum".

http://www.timesonline.co.uk/tol/money/pensions/article721000.ece

jem16

atearth wrote: »

What if the person is with a final salary company pension?

Then normally you would receive a pension until you die. After death your spouse will probably receive a half pension until he/she dies.

Each scheme has different benefits so you would have to check the scheme booklet.

Would have been better to keep all your questions in one thread as it gets confusing.

http://forums.moneysavingexpert.com/showthread.html?p=24303579#post24303579

Andy_L

atearth wrote: »

What if the person is with a final salary company pension?

Then you don't have £X in a pension. You have a, contractual, promise from your employer to pay you that final salary pension. Having enough money to pay that pension is their problem

Dick_here

Andy_L wrote: »

Then you don't have £X in a pension. You have a, contractual, promise from your employer to pay you that final salary pension. Having enough money to pay that pension is their problem

Which they solve by screwing all those who are still paying into the scheme :rolleyes: