Options to take on my pension, help/advice welcome

anthonysimpson

Hi,

I have a pension with Standard Life, to the value of £41,690.67 they have given me three options;

1 - Lump sum - £10422 and yearly payment of £1569 - NO yearly increase, no guarantee period and no dependant pension payable on my death

2 £10422 yearly payment £1543 - no yearly increase, 5 year guarantee period and no dependant pension payable on my death

3 - lump sum £10422 yearly payment £1543 - No yearly increase, 10 year guarantee period and no dependant pension payable on my death

4 - No lum sum and yearly payment £1705 - No yearly increase, no guarantee period and full dependant pension payable on my death

My question is I will never see this full £41690.67 back as I am now 63 years old and even if I take the lump sum my wife would not get anything and still I will lose the rest of the own money put in.

Many thanks Tony

dunstonh

You didnt ask a question.

You have missed off option 5. Use the open market option via an IFA. That should yield a better income rate.

even if I take the lump sum my wife would not get anything and still I will lose the rest of the own money put in.

Change the death benefits then. However, it is not all made up of your own money. There is tax relief and tax refunds in there and possibly employer contributions as well and maybe some contracted out benefits as well. Why do you think you are only going to live for a short time?

anthonysimpson

Sorry the question should be, which option is best for me, to get the full benefit of my pension

Linton

anthonysimpson wrote: »

Sorry the question should be, which option is best for me, to get the full benefit of my pension

1) MOST IMPORTANT: Visit an IFA who may well find better paying annuities. It is often a bad idea to take an annuity from your pension company and there is no need for you to do so.

2) I dont understand why you dont think you will get the full pot back. The current life expectancy chances are that you will live to your mid eighties and could well live longer than that. Unless of course you have a life shortening medical condition, and in that case an IFA could get you a better annuity rate.

3) As to which is best, it entirely depends on your circumstances and needs. Do you want your wife to have an income after you are gone? Have you any other income? Do you need a lump sum to pay off expensive debts? Do you have other savings? etc etc. As you see this is a complicated question - an IFA could talk through the issues with you.

xylophone

Have you any health condition that impairs your life expectancy?
If so, you could get an enhanced annuity.

In any event, you should try an IFA for the open market option?

If there are no yearly increases, you could take that lump sum and perhaps invest it in a stocks and shares ISA in the hope of income and some capital gain - you might try an equity income or distribution fund. http://www.cavendishonline.co.uk/investments/our-service/

Have you obtained a state pension forecast?

What is your wife's pension situation?

Do either of you have insurance that pays out on death?

If your total income will be very low in retirement you might qualify for pension credit and to other means tested benefits?
http://www.ageuk.org.uk/money-matters/claiming-benefits/pension-credit/

dunstonh

Sorry the question should be, which option is best for me, to get the full benefit of my pension

none of those options. See in IFA would be the best option. You will get more and there will be options you are not being presented by std life

jamesd

You shouldn't take any of the Standard Life options. You'll get more via an IFA. SL are not required to offer you the best deals, just the deals they offer. That's why they are required to mention the open market option to you.

You're only 63 years old. Half of men in normal good health at that age are expected to live until they are around 88 and older. The SL options would be a particularly bad idea if there's anything that decreases how long you might live, like being overweight, smoking, diabetes, circulatory trouble and lots of other things. Since you seem to be expecting to live a much shorter life than is normal this may well apply to you.

It's not even necessary to buy an annuity. You can take a lump sum of £10,400 and an ongoing income of £1,560 or so (using 5% of the remaining lump sum to get that) instead, using income drawdown. Your wife would inherit all of the money that is in the pot at the time you die, without any tax charge. Anyone else could inherit it after a 55% tax charge. The capital value would go up and down because this uses investments to produce income. SL may not offer you this option but there's no problem to transfer to a place which does.

atush

Basically, you haven't told us enough.

What is your health like? Your savings and investments (ie do you have any)? Does your wife have a pension?

Taking a max lump sum isn't always the best option- esp if you already have substantial cash and other assets outside your pension. Sometimes it is better to take a lower LS or none and have a higher income.

I agree, you should see an IFA.

bilbo51

anthonysimpson wrote: »

Hi,

I have a pension with Standard Life, to the value of £41,690.67 they have given me three options;

1 - Lump sum - £10422 and yearly payment of £1569 - NO yearly increase, no guarantee period and no dependant pension payable on my death

2 £10422 yearly payment £1543 - no yearly increase, 5 year guarantee period and no dependant pension payable on my death

3 - lump sum £10422 yearly payment £1543 - No yearly increase, 10 year guarantee period and no dependant pension payable on my death

4 - No lum sum and yearly payment £1705 - No yearly increase, no guarantee period and full dependant pension payable on my death

My question is I will never see this full £41690.67 back as I am now 63 years old and even if I take the lump sum my wife would not get anything and still I will lose the rest of the own money put in.

Many thanks Tony

You seem to be assuming that a 10 (or 5) year guarantee means that you get paid for 10 (or 5) years after retirement and then it stops. It doesn't mean that. It means that the payment will continue for at least 10 (or 5) years. If you live for 20+ years after retirement it will be paid for 20+ years until you turn up your toes.

If you should die before the end of the guarantee period, then your beneficiaries would get the remainder of the guarantee.

Other options are also available to you as suggested by the posts above.

AlanWragg

Hi, I'm new here but in a similar position, I have £137,000 in a DC pension and am at a position where I want to convert it to an income.

I will be 65 in Feb 13 and wish to take it then.

I have used the MAS annuity tables to see what they offer, 5 year guarantee, 50% spouse, increase with RPI.

Average about £4200 pa. That's a whopping 3%!

Will it be advisable to see an IFA?

Approximately what will an IFA charge?

anthonysimpson, don't know about you but i'm wondering if I've been a total mug and should have stuck my money in savings accounts / ISAs.

Strikes me DC pensions suit the providers and the rest of the financial services who seem to view them as a cash cow!

dunstonh

I have used the MAS annuity tables to see what they offer, 5 year guarantee, 50% spouse, increase with RPI.

Do not rely on those tables. They are not accurate enough to make a decision.

Will it be advisable to see an IFA?

yes

Approximately what will an IFA charge?

£1000-1500. However, that is about the same as the commission that would be paid on a fund of that size. So, roughly cost neutral compared to you doing it yourself.