Invest my pension into a Pension Fund?

fredg_2

I am 61 and intend working (self employed) for at least another 5 years. I have been paying into 4 personal pension schemes, all of which matured at my age 60. Can I finish three of these schemes, purchase annuities, then pay the resulting income, plus the current payments assigned to these three, into the fourth scheme, which remained in operation? If I can, should I? I am at present a 40% tax payer (if that's relevant.)

Thanks.

dunstonh

pensions do not technically mature until age 75. They do allow earlier retirement though and that is the position you are in. The exception being older, less flexible plans which may have specific dates which active guaranteed annuity rates.

Can I finish three of these schemes, purchase annuities, then pay the resulting income, plus the current payments assigned to these three, into the fourth scheme, which remained in operation?

Why? You will get an annuity rate based on age 61 and not older. You will pay 40% tax on the income and putting the income back will only get that tax back again.

Why not investigate if the pensions can be combined into one (if no guaranteed rates apply). This serves the purpose of offering potentially lower charges (charges on many plans get reduced the more you have in there). Plus when you do finally puchase an annuity, you will get a better rate with one pension than you will get with four. Even if the values were the same.

Taking the benefits now, when you dont need it will cost you more money due to lower annuity rate. Tidying it up is a better option to look at.

EdInvestor

If he's 61 and his pensions matured at aged 60 (NRD) he will probably have lost his right to any guaranteed annuity rate already.

Can I finish three of these schemes, purchase annuities, then pay the resulting income, plus the current payments assigned to these three, into the fourth scheme, which remained in operation?

Yes

If I can, should I?

Depends entirely on the nature of all the different schemes, what they are invested in, what charges you are paying and what your ultimate aim is.

I am at present a 40% tax payer (if that's relevant.)

It might be. But you should never let the tax tail wag the investment dog.

dunstonh

If he's 61 and his pensions matured at aged 60 (NRD) he will probably have lost his right to any guaranteed annuity rate already.

Many plans do not remove the GAR if you dont respond. They either keep the GAR in place or increase it annually or again at 65. I would go as far to say most are like that on the basis that I cannot think of many that have a short window to utilise the guarantee but many more that leave it open ended.

fredg_2

Thanks to everyone who has responded. Unfortunately I have made a cardinal error and not given you a relevant piece of information - i.e. that I'm after the 25% tax free from these pensions, to invest in some property.

Also, I can't shake out of my head the following reasoning: if I take the annuities now they will of course provide a lower income than if I take them later...but the income will be over a longer period, so in the end (i.e. when I pop my clogs) would there be much difference in the totals? And by reinvesting the pension payments into my remaining pension fund I cancel out the tax penalty.

I'm being simplistic, I know, but I need someone who knows about these things to tell me where my reasoning is faulty, so I can sleep at nights!Thanks again.

dunstonh

if I take the annuities now they will of course provide a lower income than if I take them later...but the income will be over a longer period, so in the end (i.e. when I pop my clogs) would there be much difference in the totals?

lets say you delay for 4 years. The annuity rate will only be about 0.8% higher (unless smoker or guarantee exists). However, if you are getting 7% a year growth (which is fairly easy as an average) then that makes a big difference to the fund value. If you have got 15% a year, even more so.

Currently, you have the money in a product that is tax free and on death, is paid outside of your estate of IHT purposes. It can be used to invest in property (either in bricks & mortar funds, real estate investment trusts, Propery reit funds or property shares). So, if you fancy property, then you can do a lot of that within the tax free pension. If you take the 25% out and stick that into property, then you are looking at a taxable asset and investing in an area which has underperformed retail investment for the last 3 years and there are concerns over the property market (which has just got now got to the same point in earnings vs mortgage as it was in the early 90s before the property crash).

100k at 60 annuity rates will pay around £6,300 p.a.
150k at 65 annuity rates will pay around £10,600 p.a.

EdInvestor

fredg wrote:

Thanks to everyone who has responded. Unfortunately I have made a cardinal error and not given you a relevant piece of information - i.e. that I'm after the 25% tax free from these pensions, to invest in some property.

It's not necessary to annuitise the rest of the money so as to get the 25% tax free cash these days .Instead you can just transfer the pensions into a SIPP, take the 25%, and then put the rest of the funds into "income drawdown", leaving it invested inside the SIPP until you need to take an income from it.No need to take an income now and incur extra tax.