What to do with small 'top up' pension when retire?

BlondeHeadOn

My OH is planning to retire very soon, he's 63. He has a good final salary pension scheme from his employer, from which he has not yet decided whether to take a small lump sum.

He also has a small private pension scheme he took out as a 'top up' pension some years ago, in case he wanted to retire early. This scheme has a value of £32,000 in the last statement (December 2011), so not very huge monthly pension payments.

What we don't know is what the options are for the smaller scheme, and how best to proceed. As I understand it annuity rates are pretty bad at the moment, so would it make more sense to 'park' this small pension in some way until annuity rates improve? (He doesn't really want to continue paying into this small pension once he's retired, but I suppose he could if this is advantageous.) Or is it possible to take a lump sum from the smaller pension? Or cash part or all of it in? Or some other strategy that I havem't thought of?

I'm happy to provide more details if that would help, but I don't know what would be useful so please ask.

BTW he hasn't contacted the pension provider for information yet, as we wanted to know more about the possible options beforehand.

BlondeHeadOn

Having read through the sticky about flexible drawdown, I think my OH would qualify for this option on his 'top up' pension once he starts taking his main pension.

Just one more possibility to add into the mix?

kidmugsy

If he wants a method to bridge the gap to the start of his State Pension, flexible drawdown would be very convenient. He'd have to check whether that particular pension company offers Flexible Drawdown: if not, he could transfer to a provider that does. It might also make it more attractive to eschew taking a lump sum from the occupational pension, and so increase the size of the monthly occupational pension. (I'm assuming that the small pension doesn't guarantee a wonderful annuity rate: do check.)

A good place to begin is to find out how much monthly pension he has to give up in return for getting a lump sum from his occupational scheme. A rule of thumb that I've seen quoted by commenters around here is that if the ratio of lump sum to pension forgone is 20:1 the lump sum is good value. If it's 12:1 it's poor value.

Naturally you'll need to take the position of each of you into account: good health? Long-lived parents? Any debts you're keen to clear, any children who'd like a bung to help them buy a house, etc, etc?

BlondeHeadOn

kidmugsy wrote: »

If he wants a method to bridge the gap to the start of his State Pension, flexible drawdown would be very convenient. He'd have to check whether that particular pension company offers Flexible Drawdown: if not, he could transfer to a provider that does. It might also make it more attractive to eschew taking a lump sum from the occupational pension, and so increase the size of the monthly occupational pension. (I'm assuming that the small pension doesn't guarantee a wonderful annuity rate: do check.)

A good place to begin is to find out how much monthly pension he has to give up in return for getting a lump sum from his occupational scheme. A rule of thumb that I've seen quoted by commenters around here is that if the ratio of lump sum to pension forgone is 20:1 the lump sum is good value. If it's 12:1 it's poor value.

Naturally you'll need to take the position of each of you into account: good health? Long-lived parents? Any debts you're keen to clear, any children who'd like a bung to help them buy a house, etc, etc?

Answers Yes, Yes, No, No

Very useful response, thank you.

I'll find out about the lump sum option, but we don't really need this (or not very much). It's all useful to know though.

Many thanks again