Too take or not to take a deffered pension?

Stubod

hi all,

next year i have the option to start taking a couple of "old" deffered pensions,(will be 55). The total "fund" is worth about £100k, and I have been advised that it may generate a pension of about 5k, or I can take a lump sum of approx 25k and get about 3.2k per annum.

they are both "defined benefits" schemes

I do not currently need this money, and I am aware that if I take it i will end up paying 20% tax on it anyway.

however I am unsure whether to start taking them now, and re-invest the money, or leave them until needed. I ask this as i understand that they may not be fully index linked.

..any advice welcome....

thanks

atush

First of all you need to check your facts and post back.

you say your 'pot' is worth 100K (which means defined contribution) then you say it is Defined Benefits (which means Final/Average salary scheme.

Until you clarify, my position remains if you don't need it, don't take it.

Or if (it is a DC one) you need that 25K, then take it but keep the rest invested in a DD scheme and take no income and it will continue to grow. If it is DB, leave it alone.

xylophone

Two deferred defined benefit schemes?

it may generate

I don't quite follow this. Two schemes or one? Two with same company/group?

may not be fully index linked.

What does the scheme booklet say?

20% tax on it anyway.

Might taking the pension push you into higher rate tax?



Two companies?

You have the option to draw the pension(s) at 55 - actuarially reduced? Or is 55 Scheme pension age?

dunstonh

Taking retirement income from pensions is typically a once in a lifetime decision that you cannot go back and change later on. It is important to get it right first time.

Just because the scheme allows early retirement commencement at 55 does not mean it is cost efficient to do so. What are the penalties for commencing it early?

You say they are both defined benefit schemes but then describe one as having a fund value and generating 25% lump sum. That isnt how defined benefit schemes work.

The general rule of thumb (which is always correct) is that if you dont need the pension then you do not commence it. However, there is not enough info to say and there is conflicting info in your post and some facts missing.

mania112

Stubod wrote: »

hi all,

next year i have the option to start taking a couple of "old" deffered pensions,(will be 55). The total "fund" is worth about £100k, and I have been advised that it may generate a pension of about 5k, or I can take a lump sum of approx 25k and get about 3.2k per annum.

they are both "defined benefits" schemes

You've described a money purchase pension, rather than a defined benefit (Final Salary) contract.