An oldie but newbie for a Pension

nad1611

In real terms I'm a bit of a novice when it comes to Pensions. I have aN NHS Pension, but due to ill health I haven't paid into it for many years and not been in a position to have another pension.

I will shortly hopefully be in a position of contributing £150 to £200 per month to a Pension I am 49 and would probably keep it going until 65yrs.

I know everyone's need are different but the NHS Pension will be small, so I want to achieve the best I can, obviously. I would be more interested in the annuity than the lump sum.
We'll have paid off our mortgage by 2018, so this is for income for daily living.
So any help would be great. Just treat me like I know nothing!!!

kidmugsy

1) Don't despise the lump sum - it's tax-free! If it's income you'll need, you could always eventually use the lump sum to buy a non-pension annuity for yourself or your spouse - they come on tax-favoured terms.
2) One thing that may be important to you is that you will be able to draw lump sum at age 55, without your needing to start taking income from the pension - you could leave the balance invested . That means that the lump sum could be available to you in six years - just before you may want to use it to help pay off your mortgage.

nad1611

kidmugsy wrote: »

1) Don't despise the lump sum - it's tax-free! If it's income you'll need, you could always eventually use the lump sum to buy a non-pension annuity for yourself or your spouse - they come on tax-favoured terms.
2) One thing that may be important to you is that you will be able to draw lump sum at age 55, without your needing to start taking income from the pension - you could leave the balance invested . That means that the lump sum could be available to you in six years - just before you may want to use it to help pay off your mortgage.

Thanks Kidmugsy; I've nothing against the lump sum idea, although it seems but I may be wrong, that the annuity tends to be seen as better generally.
1) How does the non pension annuity work and can you give any examples?
2) I'd like to know more about the your no.2 option, I presume with this, you continue contributing. Is the drawing down part taxed?
Thanks

nad1611

Hoping for some additional advice!;)

chucknorris

nad1611 wrote: »

Hoping for some additional advice!;)

Well this is merely a guess because of the assumptions that have to be made, I have assumed:

2k a year paid in for 16 years
Investment grows at 3% above the rate of inflation over that period

That would give you a pension pot of about 40k which would give you a pension of about £30 a week (at today's prices)

nad1611

Thanks for that. Hopefully someone can give me an idea about what I should be looking for when starting a new Pension, what type of pension?