Increasing Pension Payout

Apreciar

I have a pension pot that will realise £20,800 (this is if I take no tax free sum), I need to secure a pension of £25,000 per annum. How can I realise this? Is it possible to supplement my compulsory purchase part and pay extra to secure the higher amount.

Debt_Free_Chick

Could you clarify please ....

You have a pension pot with a fund of £20,800 .... or the pension pot will provide a pension of £20,800 p.a.

An annuity (for a male at age 60, single life, 5 year guarantee, RPI increases) paying £25,000 today would require a total fund of approximately £630,000.

How old are you now? Are you looking to save now, to provide an income of £25,000 p.a. in the future? If so, this calculator should help.

Apreciar

The pot is £326,000 this will realise a pension of £20,800 if no tax free allowance is taken and no inflation or guarantee. I am female, retired and 63 (Almost) I will not be able to add to the pot as I retired three years ago.

dunstonh

You should be looking to take the tax free lump and invest it for income. Otherwise you will be hit increased tax by the removal of the age allowance at age 65 (increasing at age 75).

You are allowed to pay upto £3600 a year into a pension without earning. Whilst it wont make a lot of difference, it is still possible.

If you have other savings/investments, they could be utilised. Also, if you are looking at retirement commencement, you shouldnt just accept the figures offered by the company. Get an IFA to look at an open market option which basicall shops round to get the best income on your pension pot.

EdInvestor

After taking the 25% tax free cash and investing it for income, you could put the remaining fund into a Sipp in income drawdown.This means that your fund remains invested, with the hope that it will grow in value over the years and provide a bigger pension income. Income levels from drawdown plans are set by the Govt and are 20% higher than what you can get with an annuity.

Note that this involves higher risk.Attention is needed to minimise charges and to make sure the fund is properly invested, so that irisk is minimised while income is maximised.

Another way to generate a higher income if you own your own home is to look at equity release plans or lifetime mortgages. You can often release up to half the value of your home as a lump sum or regular income. The loan rolls up and is repaid when the house is sold after your death.You have the right always to remain in the home.

Are you getting the full amount you are entitled to from the state pension? The basic state pension would cost 100k to buy on the market, so it's well worth checking your credits are properly up to date.

Apreciar

I'm sorry if I am confusing matters here, but what I want to do is realise my pension immediately and as the present value at the best in the FSA tables would only give £20,800 I wondered if a cash purchase annuity could be bundled with the compulsory purchase part to increase it to the £25,000 I require. I realise that his means that I forego the tax free allowance.

EdInvestor

Beldray wrote:

I'm sorry if I am confusing matters here, but what I want to do is realise my pension immediately and as the present value at the best in the FSA tables would only give £20,800 I wondered if a cash purchase annuity could be bundled with the compulsory purchase part to increase it to the £25,000 I require. I realise that his means that I forego the tax free allowance.

To do this what people normally do is take the tax free cash and use that to buy the purchase life annuity, which gives a slightly higher overall return due to the tax treatment than buying a compulsory purchase annuity with the whole fund. It won't bridge anything like the whole gap though. Consult an annuity specialist firm to seek the best deal.

Some details of PLA rates

Debt_Free_Chick

Beldray wrote:

I wondered if a cash purchase annuity could be bundled with the compulsory purchase part to increase it to the £25,000 I require. I realise that his means that I forego the tax free allowance.

I think this is possible under the new A-day rules - an unrestricted contribution in the final year of "retirement" i.e. the year in which you take the benefits.

However, I don't think you would qualify for tax relief (other than £792, which is the relief on a contribution of £3,600).

If you have cash, there is nothing to stop you buying a separate purchased life annuity (PLA). This is simply an annuity, where the cost is provided from private savings and not from a pension plan.

You shoud also take into account Dunstonh's comments about taking the tax free cash from the pension plan and using that to buy a PLA.

It might be worth you consulting an IFA or an annuity broker to work out the relevant figures. But, in theory, if you have sufficient private savings then yes - you should be able to buy a PLA to top-up your pension annuity to provide a total income of £25,000 p.a.