Lump Sum conversion calculations

kidmugsy

You listen to jem, puss; she knows a thing or two.

islandcat

jem16 wrote: »

I think nowadays that depends on what you intend to use the cash for.



Have you considered just taking enough cash to pay off the mortgage and give you an emergency pot?



Are you needing the extra income from the investment returns? If so you would require a return of 8.33% to match what you are giving up pension wise.

Jem, Without getting too complicated, can you tell me how I would need 8.33% to match my pension ?

Or is it the bank trying to maximise the amount I invest with them ?

Thank you

jem16

islandcat wrote: »

Jem, Without getting too complicated, can you tell me how I would need 8.33% to match my pension ?

Rough and ready calculation - 100%/12 (the commutation rate) = 8.33%

Or is it the bank trying to maximise the amount I invest with them ?

Thank you

Quite probably.

If you do decide to invest, please don't go near a bank. See an IFA.

islandcat

jem16 wrote: »

Rough and ready calculation - 100%/12 (the commutation rate) = 8.33%/QUOTE]

The obvious was staring me in the face ! and that would have to yield 8.33% after tax as the commutation is tax free I presume

jem16

islandcat wrote: »

that would have to yield 8.33% after tax as the commutation is tax free I presume

That would depend on your tax situation. Realistically you are probably thinking of gross as the pension would take you over the personal tax free allowance.

However as no savings account is going to give 8.33% interest at the moment you would be thinking of investments rather than savings so that 8.33% would have to be after any fees were taken into account.

islandcat

jem

Many thanks for your comments.

I've had "advice" from IFA from Metlife, they were only interested in taking the whole of my council pension and moving in to a MetLife scheme; advice from IFA from Affinity, and also the Financial Planning Manager at my bank, HSBC.
Not one of them gave any advice on whether it was better to leave my money in my annual pension. They seemed only interested in converting the maximum to be invested.

I guess I'll just have to go with what feels good for me.

Regards

jem16

islandcat wrote: »

I've had "advice" from IFA from Metlife, they were only interested in taking the whole of my council pension and moving in to a MetLife scheme; advice from IFA from Affinity, and also the Financial Planning Manager at my bank, HSBC.

First of all the IFA from MetLife isn't an IFA - he/she is an FA with an Insurance firm who can only provide MetLife products.

The Financial Planning Manager is also not an IFA and can only recommend HSBC products.

Steer clear of both.

Affinity at least appear to be IFAs. Were you paying a fee for their advice or was it commission based?

Not one of them gave any advice on whether it was better to leave my money in my annual pension. They seemed only interested in converting the maximum to be invested.

Perhaps try and see a few more IFAs - https://www.unbiased.co.uk.

Did you ask which was better to do or did you put the idea forward?

I guess I'll just have to go with what feels good for me.

Regards

In the end you may have to make that decision. However I'd like to think that a decent IFA would go through all the options with you and set out the different scenarios with each choice.

islandcat

Sorry, not quite accurate, it was an IFA from a local financial services offerring a MetLife solution.

I did'nt ask the question, which was better to do. I will ask them before I make final decision.

The advice I have hade to date has all been for free, I will need to pay fee/commission when I take up their products.

jem16

islandcat wrote: »

I did'nt ask the question, which was better to do. I will ask them before I make final decision.

I think the question you need to ask yourself is - do I need to invest the lump sum for income?

If the answer to that is yes then I would be inclined not to commute any of the pension.