help, which option

charlie11

I am 58 this year and hope to retire at 60. I have sent for a pension quote for when I am 60. There are 4 option
1) full pension of £665.70 a month for life 2) £40.805 lump sum and £510 a month for life .3) full pension of £1000.94 from 60 till I am 65 then reduced to £558.29. 4) lump sum of 40,805 and £845.32 a month from 60 to 65 then it is reduced to £402.67
I am married and have no mortgage. I also hve 2 smaller pensions to receive one will be £13,070. lump with £163 a month and another at 10,000 lump and and £150 a month.I know you will pay no tax on the lump sums (up to now) but I am still not sure what to do. I also have some savings.Any suggestions would be much appreciated. Iwas thinking about seeing a independant financial advisor but not sure what to do.

Thanks Charlie

Thanks

calypso_rhapsody

Well the answer depends on your circumstances, needs and ambitions.

But if it were me i would go for 2 - the lump sum, tax free should be able to be invested to achieve an income similar to or in excess of the pension foregone (4.57%). You would probably need to invest though not save ... so if you are uncomfortable about doing that or the risk involved then 1 would probably be a better option for you.

Not sure i see the point of opting for 3 or 4 unless it is to bridge the gap until another pension kicks in (state pension maybe?) If that makes sense then option 4 on the same rationale ...

Are any of these index linked? is there a spouse's pension? these are factors that might affect your decision ....

A chat with an IFA can't harm - especially if you can get a recommendation - the first meeting should be free and you can learn a bit more before committing to any fees.

jamesd

Is this a work final salary scheme or you buying an annuity? The answers are different for each case. Best to give the answer to this question for each of the pensions so we can cover each case that applies.

If any of these involve buying an annuity you should visit unbiased.co.uk and find a local IFA. The IFA will be paid commission and there shouldn't be any explicit cost to you. The IFA will be able to get the best annuity deal in the whole market, not just the deal offered by the place where you happen to have the money invested now. This is even more important if you smoke, have had heart or circulation trouble or have any other condition that could reduce how long you might lie.

charlie11

Thanks for your quick response, I am in really good health and a non smoker. The main pension is index linked and one of the smaller ones are as well. My wife who is 56 and does not work will have a very small pension of £80 a month. What tax would I pay if just say I had a total pension of £1000 a month? or is there a calculation you can use.

bigfreddiel

tax is simple to estimate and it will be £65/month

This is how its done

take off your allowance

multiply the remainder by .2 - thats your tax

£1000/mnth = £12000/year

allowance 2012/13 is £8105

tax =12000-8105=3895*.2=779

Tax for the year will be £779 or £65/month

remember no ni on pensions

hope that helps

fj

charlie11

Thanks thats excellent, By the way they are company pensions I have so there for annuitys are no good.

calypso_rhapsody

If the pension is index linked i would probably change my mind - to achieve a real return of 4.5% could be a challenge! But it so depends on your circumstances and whether you would like to have the lump sum to lavish on a round the world holiday or whatever!!