Age 53 Pension Value £29161 annuity offer £791pa?

dunstonh

What does this actually mean?

It means that at scheme pension age, the pension has to pay at least a guaranteed minimum amount even if the fund value is unable to achieve that (the pension provider takes the hit). If the fund is short, then reduced or even no tax free cash will be available.

Also they say the scheme does not offer an Income Drawdown option. Does this mean I can transfer the pot on retirement to a provider who is able to offer such a facility?

She can but she will lose the GMP and protected minimum retirement age.

marathonic

Is she a higher rate tax payer or does the scheme operate via Salary Sacrifice?

If so, would it not be worthwhile working, if possible, for another 5-7 years and putting the MAXIMUM allowed under the schemes rules towards the pension?

That way, you could use your £400k in other investments to cover the shortfall in expenses and she should have a much bigger pension at retirement - not enough to consider a SOLE source of income but a lot bigger than it is currently.

With the tax relief, there's no reason that she shouldn't be able to double the size of her pot before the age of 60. The annuity offer would be higher due to her being older and she'd likely be able to take the full 25% Tax Free Cash.

Deciding to retire early is a big decision and, if you're investing in risky assets and retiring at or before the age of 55, I'd assume a 3% annual withdrawal in order to maximize the chance of the investment pot lasting for your entire life.

With £400,000 in investments, this means £12,000 per year in income. Could you live on that? By retiring at a later age, you should be able to increase the withdrawal rate to 4-5% whilst minimizing risk of depleting the pot.

Of course, 3% is a low withdrawal rate but, if you had £400,000 in the stockmarket in the market at the peak of 2007, this would have dropped by more than half by 2009. Are you saying that you wouldn't have got scared along the road and withdrew everything - especially with the widespread cuts in dividend payouts?

Investing in high risk assets is fine for the young where the worst case scenario is that they have to up their contributions a little over their remaining working lives if the stockmarket doesn't perform as anticipated. When the worst case scenario involves adjusting your lifestyle and living on the breadline, it's a much tougher decision.

philng

Thanks Dunstonh.

So how much is the GMP worth or how do I find that part out?

Just working out best option as due to pressure/stress at work unlikely she can continue to work there for much longer. Other option is to resign & leave pension invested but there would then be clawback on work share scheme as she wouldnt then be deemed a 'good leaver'.

In some ways this pension is insignificant as I have a Co Pension (final salary) guaranteed £18000 pa at present but predicted £26000 if I remain there for next 13 years to age 60. Also my wife has a final salary pens from a previous emp currently worth around £6000pa.

mania112

philng wrote: »

So how much is the GMP worth or how do I find that part out?

I don't see how a DC scheme paying an Annuity will have a GMP, i'm not sure that's relevant to this.

dunstonh

mania112 wrote: »

I don't see how a DC scheme paying an Annuity will have a GMP, i'm not sure that's relevant to this.

I was thinking section 32 buy out bond.

philng

I am assuming this pot has now grown to £35k+ with the rise in markets and contributions since my original post.
My wife also has a number of other pots say amounting to £20k+ from other pensions.
My wife is 54 in July & has the continued right within existing scheme to retire after age 50 & has seriously had enough of work.
She has 2 options:
1) Resign & not take pension in which case she would lose around £3500 in a share scheme she currently pays the max £125pm to which company tops up by £30pm as she would be classed not as 'a good leaver'. This would allow pension withdrawal delay as we don't really need the income from it currently.
2) Retire and be classed as a 'good leaver' in which case she won't lose the above £3500 but with annuity offer being so low i was wondering whether the drawdown option would make more sense. My current employer does not offer this so how would I go about transferring this pot to a provider who does? Which provider would offer the best terms & lowest fees?
My wife also has another final salary pension from a previous employer which she will not draw until 65 current value approx £6000pa & we have significant investments hence reason for non urgency to take annuity now.
Thank you.

mania112

philng wrote: »

I am assuming this pot has now grown to £35k+ with the rise in markets and contributions since my original post.
My wife also has a number of other pots say amounting to £20k+ from other pensions.
My wife is 54 in July & has the continued right within existing scheme to retire after age 50 & has seriously had enough of work.
She has 2 options:
1) Resign & not take pension in which case she would lose around £3500 in a share scheme she currently pays the max £125pm to which company tops up by £30pm as she would be classed not as 'a good leaver'. This would allow pension withdrawal delay as we don't really need the income from it currently.
2) Retire and be classed as a 'good leaver' in which case she won't lose the above £3500 but with annuity offer being so low i was wondering whether the drawdown option would make more sense. My current employer does not offer this so how would I go about transferring this pot to a provider who does? Which provider would offer the best terms & lowest fees?
My wife also has another final salary pension from a previous employer which she will not draw until 65 current value approx £6000pa & we have significant investments hence reason for non urgency to take annuity now.
Thank you.

Would she still get the £3,500 if she transferred out and into a drawdown contract?

philng

Good question I would assume so as it would be classed as retirement as the pension pot would be drawn. Retirement is classed as a good leaver.

FatherAbraham

philng wrote: »

She has 2 options:
1) Resign & not take pension in which case she would lose around £3500 in a share scheme she currently pays the max £125pm to which company tops up by £30pm as she would be classed not as 'a good leaver'. This would allow pension withdrawal delay as we don't really need the income from it currently.
2) Retire and be classed as a 'good leaver' in which case she won't lose the above £3500 but with annuity offer being so low i was wondering whether the drawdown option would make more sense.

Option 3: retire from work, but don't take the pension yet. This combines the best aspects of options 1 ("don't take the pension so young") and 2 ("good leaver").

Warmest regards,
FA

philng

The option 3 retire from work and not take pension I don't think would be classed as a good leaver & therefore the £3500 loss on share plan would apply as this would I think simply be deemed as resigning.