Should my Mum switch to Fixed Interest Deposit or Gilt-Edged Fund with 3 years to go?

[Deleted User]

My Mum is 57 and three years away from retirement at 60. Her pension provider has just written to her pointing out that she should consider switching all OR part of her fund into either a Fixed Interest Deposit AP Fund OR a Gilt-Edged AP Fund. My Mums pension value is currently approx £73000. I don’t have any knowledge of Fixed Interest Deposit or a Gilt-Edged Funds; so I would greatly appreciate some words of wisdom. What would you do in her situation? Thank you all in advance for your help. :A

EdInvestor

Is she planning to buy an annuity when she retires, or keep her money invested for a while, taking an income from it?

What fund(s) is her pension invested in now?

[Deleted User]

EdInvestor wrote: »

Is she planning to buy an annuity when she retires, or keep her money invested for a while, taking an income from it?

What fund(s) is her pension invested in now?

Thank you for your fast response. I don't know whether she will buy an annuity at 60 or not. I guess like most she will; but from what I can gather they're not what they used to be in terms of a good deal. I don't know what specific fund her pension is invested in now, except that it's with ZURICH, and I assume it's a typical spread of risk amongst stocks and shares.. Sorry I can't be more specific.

dunstonh

If she isnt going for an annuity, then a complete switch to fixed interest isnt a logical move.

If the pension hasnt been reviewed for some time, chances are it wont be a spread of funds but a single fund.

EdInvestor

What she should do is to start educating herself about her retirement income options now. Once she's decided on the way forward with those, then the investment of the money now will fall into place.

She will presumably be wanting to take the 25% tax free cash from the fund and invest that in her maxi ISA @7k a year ( she can do that now if she wants to, leaving the rest of the fund still invested to grow).The income from the ISA will be tax free, while the pension income is taxable.

There are also new products on the market that are halfway between annuities and income drawdown, so you get a guaranteed income for say 15 years, but don't lose your capital.They are a bit expensive, but may be attractive.

Also she should check her state pensions entitlement

https://www.thepensionservice.gov.uk

If she retires after April 2010 she will only need 30 years for the full basic pension now

There may also be other tax matters to take into account as well, in terms of choosing what kind of income structure is best so as to avoid paying as much tax as possible.

[Deleted User]

Still hoping for some easy to understand advice; have any of you ever had a letter like this from your pension provider, and if so, what did you do? We haven't got a clue what to do. Any and all suggestions greatly appreciated..