pension annuity help

shiredeon

jumbles wrote:

is drawdown the one where you have a pot of money can draw approx 6% per annum and pay outlandish charges for someone to oversee it ( if so another advisor mentioned that and the charges were in the region of £12k to set up and £5k pa charges, on a pot of approx £250K ( inc building ( which pays an annual rent)
:T

Sounds like he's scaremongering, you need read up and understand, it may not be for you but it's what i'll do. there's pro's and con's to both, digest further.

dunstonh

Sounds like he is following FSA rules and pointing out that it is a high risk transaction.

The charges dont need to be great and remember the adviser is going to earn more on drawdown than he would on the annuity.

All along I have said that it may or may not be suitable. However, the risk on these forums is often understated. If the FSA have decided to call it high risk, then you ought to take notice of that.

Like all investment risks, if it pays off you will do very nicely out of it. If it doesnt you will end up with less. How does your investment profile fit in with that when you are talking about your main retirement income?

jamesd

dunstonh, I didn't see any mention there from the adviser about risk, just about charges - almost as though it was thought that they would discourage the sale regardless of attitude to risk.

What do you think of the level of charges mentioned?

dunstonh

charges are higher than what you would expect but not far off the maximum.

If it is a discouragement rather than advice, then the only reason I would think that would occur is if the IFA is a salesforce IFA or employed/attached who isnt allowed to do drawdown. Or could even be a multi-tied adviser rather than an IFA. Multi-tied can do annuities but cant normally do drawdown.

EdInvestor

is drawdown the one where you have a pot of money can draw approx 6% per annum and pay outlandish charges for someone to oversee it

Yes, but it's not necessary at all to pay poutlandish charges if you use a low cost online SIPP such as the one at https://www.h-l.co.uk or https://www.sippdeal.co.uk (rather than go through an IFA).

if so another advisor mentioned that and the charges were in the region of £12k to set up and £5k pa charges, on a pot of approx £250K ( inc building ( which pays an annual rent)

This sounds as though the IFA was quoting for a full bespoke SIPP of the type you would use if you wanted to put your property in it as well as the money.

But I don't think that's what you have in mind is it?So that wasn't the correct advice. Advsors will not of course suggest what I am suggesting because they would make no commission from it if they did.

An online SIPP invested in funds or shares would cost very little to set up - usually 200 quid or so: the procedure is very simple and there's no need to use an IFA.

What are the various pensions invested in now?

OH and will you be getting full state pensions?

dunstonh

Yes, but it's not necessary at all to pay poutlandish charges if you use a low cost online SIPP such as the one at www.h-l.co.uk or www.sippdeal.co.uk (rather than go through an IFA).

Or go through a cheaper IFA. Talk about extremes. One example shows highest charges possible. Other example shows a cheaper (but not cheapest) but fails to cover the middle option. Find a cheaper adviser. Drawdown requires work. Its not an invest and forget option. If you are capable of the work and capable of running a portfolio, then you wouldnt need an IFA unless you cant be bothered. If you arent capable, then going DIY could turn out to be an expensive error.

treewilko

Hi to all - Need Help !!!

My Dad is retiring very shortly (next couple of months )

He has three pensions

1 Stakeholder pension 57K
2 Personal Pensions 17K each.

I have just read the article on repensioning and :

IS it too late for him to reap the benefits of this ?

Secondly, he has asked if he would be better taking the money out from the two personal plans and transfering to the stakeholder pension - would it benefit him particularly other than just having all pensions in one place - are there any tax or other benefits to having all the money in one account (I have absolutely no knowledge of pensions myself and hoped somebody could help as he has already been done on his pension years ago.)

Also with the 25% tax free lump sum cash - would he be better to leave it in or take it ?

or would the best advice be to see a specialist pensions advisor?

Any responses would be greatly appreciated?

Many thanks

Tree

jamesd

Repensioning works by reducing annual charges that are normally deducted monthly so there is no significant benefit at this point.

A 91k fund might be enough to make a provider interested in accepting a drawdown plan if that interests him and fits his risk tolerance.

He should ensure that he talks with an IFA to use the open market option to get the best possible annuity rate if he chooses to buy one or more annuities. The best annuity deal probably won't be from the company where he built up the pension fund.

The tax-free sum gives him valuable flexibility about when he takes the money so it is very likely that he will be best off taking it then investing it. It's also easier to pass on should inheritance or income for a wife after his death be a factor.

He should remember that he's not required to buy an annuity immediately, and not required to use all the money for it if he does buy one. He's at liberty to keep the money or part of it invested and growing until he's at least 75 if that interests him. He can choose the mixture that is best for him.

An IFA with a pension specialist qualification would be a good idea and he should use one if he wants to buy an annuity. I recommend that he seeks out an IFA who uses the NMA (New Model adviser) remuneration model since their charging approach generally seems to be most friendly to consumers.

EdInvestor

treewilko wrote:

Secondly, he has asked if he would be better taking the money out from the two personal plans and transfering to the stakeholder pension.

It's important to check that the two PPs do not have any Guaranteed Annuity Rates attached: these could give him a higher pension than normal.

- would it benefit him particularly other than just having all pensions in one place [/qiuote]

Ih he wants to do "income drawdown" ( leave the money invested and draw an income rather than buy an annuity) he would need to do this. But he would move to a (low cost) SIPP, not to the stakeholder.

- are there any tax or other benefits to having all the money in one account

No

Also with the 25% tax free lump sum cash - would he be better to leave it in or take it ?

Take it: this is the tax relief you get with pension saving.His income from the pension will be taxed. He can invest the tax free cash in his ISA and the income from that will be tax free.

dunstonh

are there any tax or other benefits to having all the money in one account

Yes. It can lead to higher annuity rates and improved terms.