What to do with £14000 annuity

keewee_2

I started paying into a L&G stakeholder pension and then lost my job 12 months later. I cant afford to carry on paying into it. I have an option to draw the pension now. The cash lump sum is appx £3600 and the annual pension (if I buy the L&G annuity) is appx £500 per month (my wife will get a reduced pension if I die), is my best option to take this now or are there other options? I'm 52 in a few weeks.

ForestFan

Hi, I would say unless you are desperate for the lump sum and small pension income now then leave the fund alone to (hopefully) grow (you may wish to check which fund(s) you are invested in). Hopefully you will find new employment giving you a further 8-13 yrs of time to make further contributions or at least allow the fund to remain invested.

If you would like or need to take benefits now then you will need to get it sorted out before April 2010, as from the start of the next tax year the minimum age you can take your pension benefits increases to 55. Re the annuity itself it may be worthwhile shopping around with the Open Market Option to see if any other Ins Co will offer a higher annuity, although any difference I imagine will be quite small. If you are a smoker or have or have had health problems then some annuity providers will factor this in to give you a higher rate. The FSA has some leaflets re your options that may help.

HTH

ForestFan

ffacoffipawb

keewee wrote: »

I started paying into a L&G stakeholder pension and then lost my job 12 months later. I cant afford to carry on paying into it. I have an option to draw the pension now. The cash lump sum is appx £3600 and the annual pension (if I buy the L&G annuity) is appx £500 per month (my wife will get a reduced pension if I die), is my best option to take this now or are there other options? I'm 52 in a few weeks.

Presume you meant £500 per year?

Reasoning: If 25% PCLS is £3,600 then the 75% residual fund is £10,800 which would buy something of the order of £500 per year.

EdInvestor

You can

a)Take the cash and the annuity as you suggest
b)Take the cash but leave the other 75% invested in an income drawdown plan until you
need it later (but note, the rule change to age 55 coming up)
c)Leave the whole lot until you need it later (but see age 55 rule).

In all cases you can stop contributions when you like.

Freelancer_3

EdInvestor wrote: »

You can

b)Take the cash but leave the other 75% invested in an income drawdown plan until you
need it later (but note, the rule change to age 55 coming up)

There are many risks associated with income drawdown and AFAIK annuity providers won't touch a fund under £100,000. Please correct me if I'm wrong.

dunstonh

Freelancer wrote: »

There are many risks associated with income drawdown and AFAIK annuity providers won't touch a fund under £100,000. Please correct me if I'm wrong.

I know what you are getting at although you have a typo in your comment. I assume you mean drawdown provider where you have typed annuity providers.

The FSA are very negative towards income drawdown cases under £100k. Mainly as they believe the risks are too great for consumers who have small retirement incomes and they shouldnt be risking what little they have. However, there are many providers that will now go down to much lower amounts because of course a small pension pot doesnt necessarily mean that is the only pension they have.

At the moment, the FSA is also fairly negative towards transactions where people are raiding their pension pots to take money out early. In many cases, people are robbing their retirement to get money now.

It doesnt mean its necessarily wrong to do it but in most cases it will be.

bendix

keewee wrote: »

I started paying into a L&G stakeholder pension and then lost my job 12 months later. I cant afford to carry on paying into it. I have an option to draw the pension now. The cash lump sum is appx £3600 and the annual pension (if I buy the L&G annuity) is appx £500 per month (my wife will get a reduced pension if I die), is my best option to take this now or are there other options? I'm 52 in a few weeks.

£500 a month on a pension fund worth £14,000?

I don't think so, pal. Especially not at 52. I think you need to read the paperwork more carefully.

dunstonh

I don't get it why quote the fsa as some force not to be messed with here yet treat blatant rule breaches on the mortgage board as a joke ?

Because mortgage regulation is light touch and not high risk. The transaction being discussed on this thread comes under a higher level of regulation and is high risk.

A hypothetical cold call from a mortgage broker isnt dangerous to someone's finances. Getting a once in a lifetime decision wrong on pension crystallisation could be.

dunstonh

Thanks for clarifying that Dunstonh - I was under the impression that FSA regulations were regulations and not graded. When they outlawed cold calling and subsequently heavily fined brokers that breached the RULE, I obviously missed the fact it was "light touch".

There have been calls to make mortgage advisers fully regulated to the same level of investment class advisers and it may happen.

Can you clarify what you mean by that- I would of thought if the cold call is followed by a meeting , then the likelyhood is an inappropriate, expensive with extortionate arrangement fees would follow, wouldnt you?

Thats a bit like accusing someone of murder because they have a knife in their kitchen. You cant assume one thing on the basis of another.

BTW I take mortgage brokers were innocent when it came to endowmenet miss selling - no damage to peoples finances there.

Mortgage advisers by definition could not sell endowment policies. So, no damage there.

BTW I spoke so someone at the FSA yesterday re the "hypothetical" calls I have received over the last few days and he very interested , he didnt appear to be "light touch" to me.

And would you know the difference?

Whatever your view, still dont understand why you felt you had to make a joke out of it?

You mean me and everyone else who posted on the thread made a joke out of it. I only started joking when you began to get rude in your responses.

keewee_2

I did in fact mean £500 per year not £500 per month (if only).

Freelancer_3

dunstonh wrote: »

I know what you are getting at although you have a typo in your comment. I assume you mean drawdown provider where you have typed annuity providers.

Apologies, your assumption is of course correct