Advice on mums pension

kingkyle2

Hi all

My mum has recently being diagnosed with a terminal illness and turned 60 on 4th Septmeber 2010. She, myself and my brother are concerned what will happen to her pension.

She has a pension with scottish life that is a SERPS(?). She paid in almost 40K and took a 25%, tax free, lump sum of about £10K in may this year (although she wasnt 60) and then she then receives an aunnity (?) of about £1K a year (~£80 per month). This left her with about 30K in her pension.

I phoned the company on her behalf (as I have 3rd party consent to discuss this on her behalf) and they said the pension has a 5year gaurantee period. This will carrying on paying the pension for 5 years to me and my brother in the same way ie 80 per month, as we are the next of kins who she has nominated as she is divorced from my father, although they are still civil ;-). It will increase by 3% per year.

This will leave about £25K in her pension. The woman says that its basically a financial contract and that after the 5 years the remainder will disappear and there is nothing we can do to change it,

Is this factually true?

Surely with any "contract" you can always change it by law. We would rather lose some of the 25K rather than it all.

She does not have life insurance as far as Im aware if that matters?

I am planning or seeking financial advice (unsure how much it costs?) from somewhere in barnsley, south yorkshire but would like guidance before i do. i.e. ideas to read around etc.

If what i have been told is true it makes me consider my pension. Surely its better to invest in property over 40 years and if you die at least it all passes on.

Any questions feel free to ask

Thanks for any advice in advice

Kyle

molerat

Sorry to hear of your mum's condition.

Once the pension has been crystalised then the "contract" has been formed so what you have been told is true. The annuity provider has taken the gamble with the remainder of the pension pot to provide that £1K pa for as many years as required. She may have been better off not taking the pension early but what is done is done and cannot be changed.

yelf

kingkyle2 wrote: »

If what i have been told is true it makes me consider my pension. Surely its better to invest in property over 40 years and if you die at least it all passes on.

There is absolutely nothing you can do so dont waste your time: the fact that an annuity pays out for the duration of life is as big an advantage as it is a drawback.

As for property? shares outperform property, are far more flexible, can be sold quickly, have no CGT to pay (as in the pension)- whats more there ar other options when it comes to taking a pension that provide far better death benefits that an annuity (phased pension, fixed term annuities etc)

sandsy

kingkyle2 wrote: »

Is this factually true? Kyle

Yes, it is.

She used the whole £30k to buy an annuity which guarantees to pay out for as long as she lives. It potentially could have paid out way more than the original £30k. Annuities are purchased for the peace of mind that they give people in knowing that they have an ongoing income for the rest of their days. So there is no £25k remaining.

I'm sorry to hear about your mum's illness. But monetary speaking, what is done is done, so there's no point in stressing about it.

margaretclare

With sympathy for your mum, but an annuity is not meant to provide an inheritance for the next generation.

With annuities there are winners and losers. As has already been said, it provides an income for life, however long or short that life may be. My DH bought a Scottish Widows annuity in the early 1980s and he's still receiving a steady payment monthly. He reckons he's now had more than what it cost him in the first place. But he knows that the annuity dies with him.