Wifes Deferred Alliance & Leicester Pension

Starship9

My wife has a deferred Alliance & Leicester Pension which is currently managed by Mercer on behalf of Santander who took over the A&L business a while ago. She has not worked for 20+ years although bringing up 2 children has been work enough I'm sure !.

The scheme she is in is a final salary one and can be drawn at age 60 with no reduction in benefits or at 55 with a commensurate reduction in the pension payable and the lump sum.

We have had a statement from Mercer, at our request, showing two estimated options at age 55:

1. Tax free lump sum = £10.6K
Pension payable = £4.8K per annum.

or

2. Tax free lump sum = £26.7K
Pension payable = £4.0K per annum.

My wife is currently 50 years old. We are very tempted to take one of the above packages.

We can work out what the additional benefits will be if we defer drawing the pension until she is 60. They don't sound hugely tempting for the delay in the income to be honest. We could do with the additional income sooner rather than later !

What we are concerned about is, in todays economic climate, is what the risks could be to securing the approximate amounts quoted above. Is it safe to use them for financial planning purposes even ?

Further to this, if we wait a further 5 years, do these risks continue to hover over us and is it better to "take the money and run" earlier ?. Our inclination is to take it early but we could be pursuaded otherwise !

Once in payment the pension will be uprated by a rate based on RPI annually.

My situation is that I took an early retirement package last year at age 51 and as a result of that we have approx £47K invested and an income that more or less pays all our day to day living costs. My wifes pension would give us some "fun" money plus another capital boost.

Any feedback or views on this would be very welcome

Thanks.

dunstonh

What we are concerned about is, in todays economic climate, is what the risks could be to securing the approximate amounts quoted above. Is it safe to use them for financial planning purposes even ?

Occupational defined benefit pensions have a protection in place. So, no worry there.

Further to this, if we wait a further 5 years, do these risks continue to hover over us and is it better to "take the money and run" earlier ?. Our inclination is to take it early but we could be pursuaded otherwise !

Usually it is better not to take it early. the pensionable salary is increased every year (usually) and the penalty for early commencement is often sizeable. It would require a calculation including both of those things to see where the breakeven point is (include tax as well).

Risk doesnt change.

Starship9

Thanks dunstonh. Thats useful advice

Our worry is that we get to the point where we want to draw the pension and find it's a lot less than we anticipated.

It's been quite hard to get information out of Mercer and you can get paranoid that they are trying to hide something about the scheme !

We are trying to do the responsible thing and plan, within reason, our financial situation for the next 10 years or so but you need reasonably reliable figures to be able to do that of course.

dunstonh

It's been quite hard to get information out of Mercer and you can get paranoid that they are trying to hide something about the scheme !

A lot of people ask pension administrators questions that they are not authorised to answer (or do not believe they are authorised to answer) within the regulatory system. They can give facts but they cant give opinions, advice or anything that could potentially fall within that area. Mercer are not known for being difficult or evasive. They are administrators for very many schemes. Often though you just have to be asking in the right way and making sure you stick to factual things.