Don't Know What to do about my deferred Final Salary Pension Scheme

GrannyLiz

I had an OK career until I was just over 50 with a reasonable final salary pension which I deferred (about 20 years of contributions) but then I got made redundant and although I have done lots of interesting things since, I didn't earn much money or save much more pension.

So when I became eligible to take the pension I left it deferred because written into the scheme is that for each full year I don't use it, it increases in value by 9%. I have my state pension and have been supplementing that with one or two other little pots of saving and bits of income but they are starting to run out.

I recently checked and the deferred pension is worth either about £15K pa plus a lump sum of about £100k or £23k with no lump sum. I don't think I have an option in between these two.

I could keep going a bit longer (say another year) without taking it but it would run my other resources down to pretty much zero and I think it is only covered up to 90% under the Govt pension protection scheme until I take it - so whatever it increases could get lost if the company goes belly-up and who knows these days with any company?

Also, when I do take it, (I am 62 in normally good health for my age as far as I know) should I take the lump sum and try to use that to generate a better extra income than the pension offers if I take it all as pension? I have no idea whether £100k invested could reasonably generate better than £8k pa. If so, what would be my best type of investment?

Or would I be wiser to spend some money now on getting an independent financial adviser to draw up a full financial retirement plan for me? I have only read fairly worrying things about smallish pots of money mostly disappearing in fees when others have gone down that route but don't know whether this is a bigger risk than doing the wrong thing now in my ignorance.

Any suggestions hints tips corrections great-fully received

Linton

GrannyLiz wrote: »

I have no idea whether £100k invested could reasonably generate better than £8k pa. If so, what would be my best type of investment?

£100K could not reasonably generate a reliable income of £8kpa.

Is your pension inflation linked? If so there is no way IMHO you could get anywhere close.

Zelazny

GrannyLiz wrote: »

I recently checked and the deferred pension is worth either about £15K pa plus a lump sum of about £100k or £23k with no lump sum. I don't think I have an option in between these two.

Normally the pension scheme will allow you to take a lesser lump sum - you just have to contact the administrators and ask. It is possible that this scheme doesn't permit it, but every scheme I've worked on has allowed it.

GrannyLiz wrote: »

I could keep going a bit longer (say another year) without taking it but it would run my other resources down to pretty much zero and I think it is only covered up to 90% under the Govt pension protection scheme until I take it - so whatever it increases could get lost if the company goes belly-up and who knows these days with any company?

As long as you're over your Normal Pension Age (as defined by the PPF based on the rules of the scheme) - which it sounds like you are - your benefits would not be reduced to 90% if the sponsoring company were to undergo an insolvency event. That said, the benefits would stop increasing as soon as an insolvency event occurred, and you may face a slight restriction on the amount of tax free cash you can take. Whether you'd already taken the benefits or not, the increases in payment would become statutory minimum on post 97 benefits and non-existent on pre 97 benefits (including GMP).

GrannyLiz

Linton wrote: »

£100K could not reasonably generate a reliable income of £8kpa.

Is your pension inflation linked? If so there is no way IMHO you could get anywhere close.

Sorry I am very new to this site and getting advice online. What does IMHO mean? My pension is inflationlinked - RPI or 3% annual uplift depending which is greater.

atush

It means in my humble opinion.

btw, is by the way, AFAIK is as far as I know. Saves typing lol.

Will 15K plus state pension be enough? Or would 23K plus the SP you receive (how much- just basic or S2P as well)be enough that you can save a lump sum into ISAs? (as you have depleted your savings, and will be a taxpayer).

If you will ba ble to save substantially with the 23K plus SP, I would go for that option and whack 5K + per annum into an ISA to build up a lump sum for home maintenace, car replacement, holidays, to leave to family etc.

xylophone

It seems silly not to bring your pension into payment if you have reached the point where "I could keep going a bit longer (say another year) without taking it but it would run my other resources down to pretty much zero?
If you opt to take the full pension you would still want some sort of emergency fund?
£100000 would be very unlikely to generate income of 8%.

As another poster has said, you could explore the possibility of taking a lesser lump sum.

If you draw your pension, don't forget to sort out your tax position with HMRC as soon as may be.

Incidentally, you might be well advised to get your pension administrator to set out for you how pre 88 and post 88 gmp affects your pension increases and how these are paid.