Pension help PLEASE

pcyam

Parents retired early few years ago and now plan to take their pension now.

We had a very good IFA but he retired and the new guy taken over is never contactable.

So, I have done a few things
1) looked around to see if there are any good IFAs -problem is we've moved to a new area so dont know of any good ones. The ones we've spoken to charge fee for jus talking to them!!

2) Done a bit of leg work myself and took whole day and went around the banks and have had quotes from them all I have had a look through and theyre all pretty much the same as they all scan the whole market.

Chosen the one referred by Lloyds TSB they dont charge but theyve asked if parents want to take the increase with inflation, 3% or 5% increase every year or to just chose the flat amount.

If they chose the flat monthly fee it will be higher compared with the other options. I was wondering what others have opted for, I understand everyone has different needs and what you have chosen is not advice but purely ideas for my parents. EG. if they decided the other options how long will it take to make up the difference of the flat amount.

TIA

kidmugsy

It all concerns guesses at the future. I'm not attracted by pensions that escalate at some low, fixed rate because it's the risk of bursts of much higher inflation that worry me. On the other hand, level annuities pay a feeble nominal rate at the moment, and index-linked a feeble real rate. So perhaps there's a case for using pension drawdown? But then, what to invest in?

gadgetmind

How old are they and how large is the combined pension pot? Do they have other income streams or have they been living on savings?

hugheskevi

Agree with kidmugsy, inflation-protection should be about the tail-risk of high inflation, whereas low fixed percentage increases are about reshaping income.

To that end, I would either have a full RPI linked annuity (expensive) or a nominal annuity (better value, but less protection) or possibly a combination [assuming I had discounted drawdown as an option.]

The only time I would choose an escalates at x% is if I was close to a key tax threshold, and wanted to reshape income a little to maximise the benefit.

You might want to check out AgeUK's annuity comparison service, it was pretty good when I last looked at it several months ago (it is free, so nothing to lose).

dunstonh

The ones we've spoken to charge fee for jus talking to them!!

How would you pay them then?

2) Done a bit of leg work myself and took whole day and went around the banks and have had quotes from them all I have had a look through and theyre all pretty much the same as they all scan the whole market.

Hardly any banks are whole of market and most do it on full commission basis which is typically more expensive than fee basis.

firsttimebuyers_2

Another factor to consider is your parents health. If they have health issues, or they smoke, they may be entitled to an 'enhanced' annuity - because of their shorter life expectency. The questions gadgetmind asked are very important in deciding what to do - the larger the pension fund the more options available to you. Similarly, if they have plenty of other income/savings/capital, this would affect their decision.

You can find local Independent Financial Advisers at http://www.unbiased.co.uk/, many offer a free, no obligation initial meeting to discuss your financial planning needs. Remember - banks offer you the products available to them, whereas Independent Financial Advisers offer you independent advice and the most suitable product in the marketplace for you.