small pension

panny300

i have just turned 55 and have received notice that i can take a pension that was frozen early 90s.it's only worth just over £12,000.
i have no other pensions.
should i leave it until i am 60 and take the full amount as a lump sum?,i have read that under £18,000 i could do this,triviality or something.
or take a £3000 lump sum and £460 a year now?.
how much would i be taxed if i wait till i was 60,i am on basic rate tax.
whats the chances of the £12000 increasing over the next five years?
to my simple way of thinking,if i take the lump sum and £460 a year now,it's going to take me over 15 yrs to get the £12000 back.
any advice please.

Cautious_Investor_3

Hi

There are a lot of questions here and I can see your dilema.

I suppose you need to think about whether you need the lump sum now e.g. to repay debt or whether you would simply take it, pay some tax on it and the put it in a deposit account. Compare the need for a lump sum now v. an income at age 60.

I have not checked your calculation of the 15 year break even point, however remember, you are not trying to get £12,000 back you are trying to get back £10,200 (£3,000 would be tax free the balance would be subject to tax at 20%), this may reduce your breakeven point somewhat. Even if it were 15 years, and you are now 55, do you expect to live past 70?

With regard to whether the pension will grow over the next few years, that is impossible to answer as you have given not details about where it is invested.

The Cautious Investor

panny300

thanks for the reply,it's with friends provident,and i think it's a with profits pension.
£460 a year for 20yrs £9200+£3000 lump sum gives me my £12000.
so it's even longer than i thought.
£460 a year not really worth bothering about,and not many people last into their 70s.
so i am trying to decide to take it now and spend it while i can,or take the lot when i am sixty.
is it right that i can take it all under the triviality thing,

Aegis

panny300 wrote: »

thanks for the reply,it's with friends provident,and i think it's a with profits pension.
£460 a year for 20yrs £9200+£3000 lump sum gives me my £12000.
so it's even longer than i thought.
£460 a year not really worth bothering about,and not many people last into their 70s.
so i am trying to decide to take it now and spend it while i can,or take the lot when i am sixty.
is it right that i can take it all under the triviality thing,

Do you have any other pensions? This would include occupational pensions (final salary pensions most definitely count in this bracket).

The total value of all pensions must be under 1% of the lifetime allowance in order to trivially commute your pension pots.

panny300

no other pensions,relying on lottery win

panny300

just need some pointers or opinions please.

zarazara

I dont know whats right or whats wrong here,but I can say what i would do. I would take the money as a lump sum now, and do something I wouldnt otherwise be able to do. Something you have always wanted to do maybe? Visit everest base camp,go on a cruise,buy a new car. Something like that. or maybe do a few things with it, go on a couple of holidays,buy a caraven,whatever. You have the chance to do something exciting, whereas less than £10 a week isnt much to look forward to,what would that but you? a coffee and slice of cake with a newspaper once aweek? Also, if you will be eligable for pension Tax credits and or council tax benefit , this small annual amount could be worth 0 because of the benefits you'll loose. so, maybe [you'll have to check the figures] you'll be no worse off for taking the lump sum and enjoying spending it.

Errata

panny300 wrote: »

thanks for the reply,it's with friends provident,and i think it's a with profits pension.
£460 a year for 20yrs £9200+£3000 lump sum gives me my £12000.
so it's even longer than i thought.
£460 a year not really worth bothering about,and not many people last into their 70s.
so i am trying to decide to take it now and spend it while i can,or take the lot when i am sixty.
is it right that i can take it all under the triviality thing,

Perhaps it will help you to come to a decision if you understand that current life expectancy is middle 80's not 60's as you seem to think.

zarazara

and yet 2 good friends of mine and several relatives have died in their 50;s and 60;s.

panny300

thanks for the input,definitely not going to use it as a pension at 65.
Just need to know if i will be able to take the full amount at 60 under the triviality rule,i know after the £3000 tax free lump sum i will have to pay the lower rate of tax on the remaining £9,000 which should leave me with £7,200.
so a total of £10,200.have i got that right?
what's the chances of the £12,000 increasing over the next 5yrs in a with profits pension

Loughton_Monkey

panny300 wrote: »

what's the chances of the £12,000 increasing over the next 5yrs in a with profits pension

Ask your pension provider about 'terminal bonus'. Don't know if this applies to your specific pension. In the case of Life Assurance, some of my terminal bonuses have added about 40% of the sum assured plus annual bonuses.