Early retirement pptions

atush

I would urge the OP to go over to the benefits board, or the CAB.

Make sure you get assessed and if your health is so bad you cannot work that you get disability living allowance or anything else you are entitled to.

Or if you are found fit enough to work at something, you get jobseekers allowance or whatever else you are entitled to for however long they allow it.

jamesd

okydoky, best to go into capped drawdown on all of the pensions except the SL one. That has two significant advantages:

1. It doesn't drain your tax free ISA pots, so those can increase in value to give you tax free income later when you're taking a higher income.
2. The lump sum can go into S&S ISA for you both over time to add to your future tax free income levels.

Assuming you're not earning money or getting much unwrapped interest you'll have a full personal allowance to exploit, making the first £8105 of pension income a year tax free. Just as if it was in an ISA but without having to touch the ISAs.

Best to take as much income from the pensions as the GAD rate allows since that's more money that can go into ISAs or can be recycled into more pension contributions. 4% on the whole pension pot value would be £9400 but you can probably take out the maximum without worrying about draining the pension pot because you'd just be reinvesting the excess above what you need, not spending it.

You'll need the tax free income from the ISAs later when your income need goes up to over £25k. Looks as though you should be able to manage that income boost provided you don't prematurely drain the non-pension pots by using them for income now when the pensions can do the job.

If the SL pot is a large percentage of the total it might be worth paying the transfer penalty. Depends on how it's invested and how much income it can add to the potential drawdown income.

okydoky

Thank you Jamesd for such a considered response.
The Standard Life pot is about £52k so just over 20% of total, transfer penalty at £6k seems a bit harsh, any chance this might reduce or disappear at some point?
Funds are with profits and managed, performance has been frankly disappointing.
If I follow your advice, and that is my inclination, I may just take the hit on the S/life contract and be done with it.
I'm reasonably financially savvy, do you think I can do the drawdown stuff using HL or say Cavendish/Fidelity or is there mileage in taking on a local IFA on a fee basis?
Thanks again.

atush

How involved have you been in investing decisions in the past? Have you chosen the funds/asset allocations in your other pensions and investments?

If not, you have a steep learning curve ahead of you so get reading ;-) But you can do it.

jamesd

Can't tell about the SL penalty. Why is it there? What's the money invested in? Is it maybe some payment to cover an IFA's initial charges? Or a market value reduction due to use of a with profits investment? Knowing why it's there will help to answer the question about if it'll go away or not. MVR looks likely and if so it may have reduced after the good year that the FTSE index and bonds have had in 2012. So worth asking about that and when it'll next be calculated if it is an MVR - it's usually done periodically, not continuously.

You can do drawdown yourself. Whether you should depends in part on your investing experience. If you wanted to use income-producing funds you might use things like these:

Invesco Perpetual High Income
Invesco Perpetual Distribution
Invesco Perpetual Monthly Income Plus.

Many others and I'd probably use twelve to fifteen funds total. But you don't need to use income-producing funds, since you can sell some to provide cash in the pension pot that can be used for the regular monthly payments.

If you want the hassle and need to file a tax return you might consider whether a two to four cheap mortgaged BTL properties are appropriate for you. Maximum of £100,000 equity, better more like £50,000. The maximums are to ensure that you keep sufficient diversification. But with your reduced income you may not qualify for any BTL mortgages.

kidmugsy

jamesd wrote: »

okydoky, best to go into capped drawdown on all of the pensions except the SL one.

Best to take as much income from the pensions as the GAD rate allows

jamesd: might it be worth waiting until 120% of GAD is allowed again?

jamesd

Maybe. Somewhat speculative on when it'll be possible. Will taking 100% now be better or worse than waiting say six months to get 120% then review in three years either way?

gadgetmind

That knee-jerk drop to 100% GAD was what finally convinced me that HMG dislike the idea of people saving for their old age via a pension and that they intend to make life difficult for those who do it at every possible opportunity.

They said it was to prevent pots being depleted but then have reviews every three years that render this impossible even if they were to allow us the flexibility and freedom of even 200% GAD.

mark55man

with the LGPS review shortly is there any way your OH could take up a higher paid job for 18 months or so (until the 2014 review), and then drift down again when the scheme changes to career average?

Am only just beginning to think about this for my OH so may not quite work like that. But in my mind increasing that final year salary will increase the final salary you get proportionately.

James and Jem have been very helpful on TPS and LGPS matters - and I would take their input more seriously than mine