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is it best to take a deferred pension early
Comments
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property.advert wrote: »Ignoring increases due to RPI and saving interest on the first 5 years money invested, you would receive £2800 a year less in retirement than if you waited 5 years. On a simple net basis, you have to wait until the 24th year before your total receipts from waiting 5 years are more than your total receipts from taking the pension and lump sum now.
That takes you until you are 84 years old and if you die before then, you lose out for sure.
I don't think there is an argument. Take the money and either bank it or save it but just see whether you can live on £808 a month instead of 1,041 a month. If you have some in the bank from the first 5 years, then you'll have interest on that.
Your situation will be individual. But if you need a car or want a holiday of a lifetime, then why wait ? If you really need the £1041 a month then ok, you wait but if you have no debts, I'd have the cash now.
Year 00Year 131,5000Year 29,6950Year 39,6950Year 49,6950Year 59,6950Year 69,69542,000Year 79,69512,495Year 89,69512,495Year 99,69512,495Year 109,69512,495Year 119,69512,495Year 129,69512,495Year 139,69512,495Year 149,69512,495Year 159,69512,495Year 169,69512,495Year 179,69512,495Year 189,69512,495Year 199,69512,495Year 209,69512,495Year 219,69512,495Year 229,69512,495Year 239,69512,495Year 249,69512,495Total9,695266,910264,180
Hi property advert, I think there are some errors in your calculations.
1. You get an age of 84 before crossover should this be 55 plus 24 giving an age of 79.
2. Somewhere in the layout you have missed out £12495 ie you have compared 24 payments of £9695 with 18 payments of £12495, should have been 19 payments of £12495. This will give an earlier crossover age.
3. You use figures of £12,495 and £9695, but £12,495 less 25% gives £9371 not £9695, this will reduce the crossover age further.
Best wishes
Stuart0 -
Hi property advert, I think there are some errors in your calculations.
1. You get an age of 84 before crossover should this be 55 plus 24 giving an age of 79.
2. Somewhere in the layout you have missed out £12495 ie you have compared 24 payments of £9695 with 18 payments of £12495, should have been 19 payments of £12495. This will give an earlier crossover age.
3. You use figures of £12,495 and £9695, but £12,495 less 25% gives £9371 not £9695, this will reduce the crossover age further.
Best wishes
Stuart0 -
That has appeared in the media at various times for the last 20 years. It hasnt happened. The Mail on Sunday is highly unreliable as a source of financial news.
There is no logical reason to remove pension commencement lump sum. Indeed, the ability for it to reduce consumer debt and increase capital spending in the short term helps the Govt.
I'm sure you are right about the MoS, but it was only the tax free element of the lump sum Rupert referred to, not the lump sum itself.I am not a cat (But my friend is)0 -
I'm sure you are right about the MoS, but it was only the tax free element of the lump sum Rupert referred to, not the lump sum itself.
ALL of a Pension Commencement Lump Sum (up to 25% of the total value* of the pension) is tax free. There is no taxable element. Are you thinking of redundancy payments ?
* For a defined benefit aka final salary pension multiply the pension (without any automatic lump sum) by 20 to get to the HMRC value.
This assumes that the value does not exceed the Lifetime Allowance, currently £1.8m, due to drop to £1.5m from 6/4/12. Only then are there tax penalties.
Never mind just the MoS, do not take any media outlet's word on financial matters.It only takes one tree to make a thousand matches, it only takes one match to burn a thousand trees. As well, the cars are all passing me, bright lights are flashing me.
Johnny Was. Once.
Why did he think "systolic" ?0 -
Do you give up anything valuable by starting the pension, e.g. insurance?Free the dunston one next time too.0
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The post you referred to was writing about removing the tax free element of the package, leaving just the ability to take a 25% lump sum. As distinct from eliminating the lump sum entirely.ALL of a Pension Commencement Lump Sum (up to 25% of the total value* of the pension) is tax free.0 -
The post you referred to was writing about removing the tax free element of the package, leaving just the ability to take a 25% lump sum. As distinct from eliminating the lump sum entirely.
Post 3 by Rupert Bear, jamesd, and the subsequent post by Alter ego specifically quoted "the tax free element of the lump sum".
That is what I was responding to and trying to make clear there is no "tax free element of the lump sum".It only takes one tree to make a thousand matches, it only takes one match to burn a thousand trees. As well, the cars are all passing me, bright lights are flashing me.
Johnny Was. Once.
Why did he think "systolic" ?0 -
That is what I was responding to and tring to make clear there is no "tax free element of the lump sum".
A better wording would have referred to the "tax free status of the lump sum".Free the dunston one next time too.0 -
That is what I was responding to and tring to make clear there is no "tax free element of the lump sum".
A better wording would have referred to the "tax free status of the lump sum".
From those who questioned its status presumably ?It only takes one tree to make a thousand matches, it only takes one match to burn a thousand trees. As well, the cars are all passing me, bright lights are flashing me.
Johnny Was. Once.
Why did he think "systolic" ?0 -
From those who questioned its status presumably ?
I read post 3 as saying the government are thinking of taxing the 25% lump sum. In light of that I pointed out that they were not thinking of stopping the ability to draw 25%. Just of taxing it.
Let's not get mired any further.I am not a cat (But my friend is)0
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