Is your pension pot going to be large enough?

JonnyBravo

IveSeenTheLight wrote: »

Can you tailor pensions to receive a greater annuity in the earliers years compensated by less in later years? I doubt it.

Yes. As already pointed out by someone in a post to you. Simply take one which doesn't increase. Inflation will reduce your later years for you.
However no doubt this isn't quite right for you. You've made up your mind already and I'm not so bothered as to convince you.

IveSeenTheLight

JonnyBravo wrote: »

Yes. As already pointed out by someone in a post to you. Simply take one which doesn't increase. Inflation will reduce your later years for you.
However no doubt this isn't quite right for you. You've made up your mind already and I'm not so bothered as to convince you.

Fair enough, I just cannot see that it would cater for the lifestyle I might want to have initially upon retirement to the sacrifice of later years when I wouldn;t need so much.

Pension wise, I'm fully bought into the company pension and will receive what it's worth at the time. Whilst I previously had visibility of the value I would receive in a final salary scheme (defined benefits), I'm now on defined contributions, meaning I have no awareness of what the pot will be wirth at the end.

As I have no feel good factor that my pension will be sufficient in the years ahead, I'm making additional provision outseide of the pension scheme to provide a source of income for me and my family.

dunstonh

Can you tailor pensions to receive a greater annuity in the earliers years compensated by less in later years? I doubt it.

As already mentioned, you either buy a level annuity or go with a short term annuity or dont use an annuity at all.

I'm now on defined contributions, meaning I have no awareness of what the pot will be wirth at the end.

Which will be the same outcome as any other tax wrapper or unwrapped option.

Procrastinator333

IveSeenTheLight wrote: »

Fair enough, I just cannot see that it would cater for the lifestyle I might want to have initially upon retirement to the sacrifice of later years when I wouldn;t need so much.

You can get 25% tax free on retirement.

You can take flat anuities which due to inflation will pay you more in real terms at the start than at the end of your life.

You can go for drawdown which lets you vary your withdrawl year on year between 0 and 120% (thoug is this changing?) of the GAD rates.

You can take short term annuities (didn't even realise that was an option until Dunstonh mentioned it).

If you want to, via the above you can access a significant portion of your pension pot in the early years. At the extreme, probably something like 40% in the first few years.

And you get tax relief on the way in.


If you can't find a pension arrangment out of that lot to suit your lifestyle, well, not a lot else that can be said.

dunstonh

You can take short term annuities (didn't even realise that was an option until Dunstonh mentioned it).

There are so many options available now.

Pensions are now being positioned for estate planning as well. Obviously death benefits pre crystallisation have always been very good for pensions but the fact you dont have to buy an annuity any more at 75 (ignoring the awful ASP option that exited before), means that on death, the spouse continues income (subject to income tax) and on his/her death the remaining fund, minus 55% tax goes to nominated beneficiary (ie. child) outside of the estate.

The 55% sounds high but its effectively the Govt taking back the tax relief and accounting for the 25% tax free cash already taken out (and tax free growth). You dont pay any IHT on it. For those with IHT issues, the pension can be a very effective estate planning tool. (for those who dont know the changes - pre crystallisation (where you havent taken the 25% or an income) the benefits are paid fully tax free. i.e. 100% of fund value)

With the changes that have occurred and modern "pensions" being platform based and having virtually identical investments to ISAs and unwrapped investments, Pensions are increasingly becoming less "pension product" and more "tax wrapper". About time too.

Anyone who still thinks of pensions as being like the insurance agent style product when they started back in 1988 or the basic stakeholder for small premiums needs to change their views and look at platform based pensions which can use whole of market funds, ITs, ETFs, shares etc and be utilised IF that tax wrapper fits your objectives.

ninky_2

it might help if they stopped calling them "pensions". i know it's shallow but even the word puts me off.

platform based investment tax wrapper sounds a bit sexier.

ManAtHome

dunstonh wrote: »

For those with IHT issues, the pension can be a very effective estate planning tool. (for those who dont know the changes - pre crystallisation (where you havent taken the 25% or an income) the benefits are paid fully tax free. i.e. 100% of fund value)

Must admit, I'd missed that one amongst the flexibility and age 75 stuff - doh!

Unsurprisingly, possible numpy question - if you have several (personal) pension plans can you crystallise some of them without affecting the IHT position of the others?

Herbie_Hancock_I_wish

Shhhh, don`t let on I told you, but my dear wife is hitting 60 next month and fullyintends to carry on working. One pension is a GAR so £50 a week from that. A silly little pension but is taking the 25% to upgrade the car. 2 old pensions that were company ones are being traced so hopefully taking her close to £100 a week. Next year comes the full state plus serps so that is something else to look forward to.

She likes what she does and part time is a definite option. For me,a little less predictable. However 3 private pensions, hopefully paying about £60 to £70 a week plus full state and a nice bit of serps. It is also likely that we will get some DLA due to my disability, sorting that out now. It is likely that I will be going on to incapacity bennies for the last 3 years until 65. Been unable to work for a fair time and possibly given the sack. There may be compensation coming my way.

Mortgage cleared with a very decent bit in ISAs, bonds and cash savings. We are pretty frugal at the moment. Always have been. Food costs us little as we are partial veggies and getting more that way. Like my dear old Dad, if I wasn`t poorly I would carry on working after 65.

So all in all, it could be a lot worse. I`m happy if I have some old motor to drive, although my driving days may be over. Waiting on Doctors reports. Add to that only one small car, no NI, no pension contributions.

However the kids coming up now. Silly student loans, a job market that is prolly going to get worse. Very high housing costs.Then the fear of no state pension. Well we will see.

dunstonh

Unsurprisingly, possible numpy question - if you have several (personal) pension plans can you crystallise some of them without affecting the IHT position of the others?

Yes. The rare cases that allowed HMRC to charge inheritance tax on them are being abolished. The 55% for crystallised and non tax for uncrystallised will be the only outcome where capital is paid out (if income continues for spouse/partner then there is no 55% but the income is treated for income tax purposes). Mix and match is not an issue.

it might help if they stopped calling them "pensions". i know it's shallow but even the word puts me off.

"pension" is a very misunderstood word. The media love printing bad pension news. With the word "pension" covering many different things from state pension, defined benefit schemes, personal pensions, SIPPs, S32 buy out bonds, S226 retirement annuity contracts, COMPs/CIMPs, GPPPs, AVCs, hybrid schemes, SASS and on and on, you cannot assume that something about "pension" will apply to your pension. However, the general public as a whole don't know the differences. Many see "pension" and think it has to do with their pension when it may have nothing to do with their type.

platform based investment tax wrapper sounds a bit sexier.

It would need to be a little sexier than that.

posh*spice

Saw this article and thought of this thread:)

Retirees forced to stay in work as affordability bites

"Many people extended their mortgages and took out extra loans in the hope they could pay them off with the income from other pensions and investments. But too often this has just not happened and the result is that people are having to keep working. The whole situation is quite serious."

http://www.guardian.co.uk/money/2011/apr/13/retirees-stay-work-affordability