cashing in pension. . or not

SSTEPHANIE

Protected Right Fund pension = tax free lump sum now £500 + small reduced pension from now on OR
I leave the £2000 there for another ten years.
Will it make that big a difference to the £2000 , and is this the sort of pension we are being advised to repension ? Thank you

EdInvestor

You might get a 7% return compounded if you repension, compared with whatever you would get if you invested the annuity payments, which would in addition be taxed.You might also pay less tax on the income if you took it later when you weren't working.

Overall however we are not talking about much because the global figure is small..

SSTEPHANIE

ok, so if I can manage to get control of this debt without that £500, and think i can do without the extra monthly payments I (and live for at least another 10 years) really i would do better to repension. ?

dougs

:think:

you already asked this question when you started this thread http://forums.moneysavingexpert.com/showthread.html?t=2000933

why start another one

EdInvestor

I'd have thought the solution to your problem is to move this pension to a low cost SIPP, eg the ones provided by https://www.h-l.co.uk or
https://www.sippdeal.co.uk

and put it into 'income drawdown'.

This is an alternative to taking an annuity.
Drawdown enables you to take the £500 tax free cash now, but leave the other 75% invested until you want to take an income later.

The only question might be that the amount is too small.

Repensioning is only relevant if the existing pension either has poor fund choice or high charges.

SSTEPHANIE

dougs, im new to site and keep losing thread and cant find answer, trying my best to hold info in my head but keep having to go back and forwards. Ive got ME and sometimes brain is not 100% sharp, forgive

SSTEPHANIE

Ed, thanks, I am going to read that again in the morning, what is SIPP? So really ei is a gamble as to whether the £500 I may take will save me more charges than it would make in interest in 10 years?

EdInvestor

A Sipp is a self invested personal pension, it's just another type along with a stakeholder or a personal pension.

What interest rate are you paying on your debt?If you are using the £500 to pay it off, then we can compare the likely return from that with the return from investing the money.
Usually paying off debt first is best.

BTW where is the pension now, which provider?

SSTEPHANIE

Barclays Protected Rights Fund - Personal Pension Plan !

Im paying about 14% on £700 with barclays overdraft (£5 monthly fee and first £300 @ 0%) total od is £1000

jem16

SSTEPHANIE wrote: »

Ed, thanks, I am going to read that again in the morning, what is SIPP?

A SIPP is designed for an experienced investor who knows what they are doing.

EdInvestor

SIPPs are also the usual method of doing income drawdown.Not many insurance companies offer this, especially for small funds.