Paid-up FSAVC and about to reach 65. What do I do?

dc1606

I have a paid-up FSAVC with Scottish Widows of c. £14000. They have just written to me to tell me that they will be sending further details before I reach 65 in June. I know I can take 25% as cash but what's the best way of investing the rest? I know I can use a different provider if I wish. Should I take out an annuity straight away or leave it for a while? Clearly the annual amount is not going to be high whatever I do but given the latest ruling, is to likely to drop considerably soon? Where can I find the best deal? I can't imagine that an IFA would gain much by advising me so would probably not be interested! Am happy to have a go sorting it out myself!

dunstonh

I know I can take 25% as cash but what's the best way of investing the rest?

From what you say, it sounds like you are looking at the unsecured pension option as well as tha the secured pension option. Why is that? Is it worth it on just £14k before tax free cash?

Should I take out an annuity straight away or leave it for a while?

Do you need the income from it? Do you need the 25%?

given the latest ruling, is to likely to drop considerably soon?

if anything, annuity rates are more likely to rise in the medium term.

Where can I find the best deal?

If you go with annuity you wont find the best deals as the residual fund value after 25% taken will mean your fund value is below the minimum premiums for many of the main providers. Some do drop to 10k as a minimum but you are cutting it fine.

I can't imagine that an IFA would gain much by advising me so would probably not be interested!

Not unless you do it on fee basis or you have an existing IFA that handles all your affairs.

dc1606

Do I need the income at the moment? Not really. Will I ever be in dire need of the potential income? Unlikely. Just thought it might be best to get something from it whilst I can. Do I need the lump sum? Not really, just thought it might be better invested elsewhere or spent!
I don't have an IFA at the moment.

dunstonh

Do I need the income at the moment? Not really. Will I ever be in dire need of the potential income?

So, the best thing is not to take it from the most tax free wrapper and bring it in to a taxable environment.

. Just thought it might be best to get something from it whilst I can

But if you dont need it then why do something with it? You may be able to improve the investment options but i dont see the reason to take it out unless you actually want the money.

Loughton_Monkey

It seems all you want to do is 'invest' the money somewhere.

Well it's already inside the pension tax wrapper. Might as well leave it there, then if you have not better use for it. The only 'logic' I could think of for converting it now (apart from needing it) would be simply to convert the 25% into a 'safe' cash savings, and 'lock in' ther remaining fund for a fixed 'safe' income - again to be put into 'safe' savings.

But for most people, that 'logic' would be a bit faulted owing to the (current) miserable savings rates.

dc1606

Not sure I follow the reasoning. What happens to it if I never take it out? Won't it just disappear into SW's funds or will my family get something from it?

dunstonh

Won't it just disappear into SW's funds

No.

will my family get something from it?

yes.

On death before commencement the full fund value at that point is paid out tax free and outside of the estate for IHT purposes. On death after commencement, it will depend on the income option you have chosen.

So, at the moment you have a tax free investment that has no income tax, CGT or IHT applicable to it. If you commence it then you will be bringing it into a taxable environment.

dc1606

On that basis I'd be stupid to take it out! Many thanks for your help!