when i hit 55 ?? ( re:personal pension)

bonnie43uk

Hi, I am due to hit my 55th birthday soon, in a month or so. My Pension company have sent me some forcasts of what i am liable to receive ( it's not much because i stopped paying in a few years ago), but it's a nice little sum which will help me out as I lost my job a few years ago and now I'm struggling on basic JSA money (£71pw). I've been told I can take out a tax free lump sum of about £10k,( thats 25% of the whole pension) and also receive about £80 per month. Can I increase my monthly payments ( for example £140) and take less of the lump sum, kind of robbing Peter to pay Paul. As I would rather have a bigger monthly payment, as opposed to the entire 25% caash lump sum. If that makes sense.
Any advice would be greatfully received.

Also, I was told by the pension company ( Frieinds Life) that i must get independent advice, so I rang my original pension company that dealt with my pension, and they told me there advice would cost me £600, which I'm very reluctant to pay)

dunstonh

it's not much because i stopped paying in a few years ago

Plus taking it at 55 wont help.

I've been told I can take out a tax free lump sum of about £10k,( thats 25% of the whole pension) and also receive about £80 per month.

But is it advisable to do so. Means tested benefits will be reduced if you do.

Can I increase my monthly payments ( for example £140) and take less of the lump sum, kind of robbing Peter to pay Paul. As I would rather have a bigger monthly payment, as opposed to the entire 25% caash lump sum. If that makes sense.

You can but it wouldnt be advisable to do it that way.

Also, I was told by the pension company ( Frieinds Life) that i must get independent advice, so I rang my original pension company that dealt with my pension, and they told me there advice would cost me £600, which I'm very reluctant to pay)

The fee is about the same as the commission would have been. It is a fair fee and would almost certainly provide you with a greater income.

p00hsticks

I'm not an expert so please look into it for yourself but I believe that the amount of any pensions in payment are deducted from JSA (even contributions based) so you may not be any better off weekly by claiming your pension now. Also, as dunstonh says ,the lump sum will also be taken into account for any means tested benefits (including income based JSA).

honizz

Sounds like one of those scenarios where you are damned if you do and damned if you don't. Means testing could hurt? Definitely need to explore first

H

bonnie43uk

Thanks for your advice. Dunstonh, you say taking it at 55 wont help, but I am in financial dire straights, I am living a hand to mouth existence at the mo. My health isn't great, and I can't see me living much over 65. It would be a massive help to me now. Also, (somebody told me, i don't know if this is true), but my JSA wont be affected so long as my personal pension payments are below £50 a week.. and I am allowed up to £6000 in savings..at the moment i have no savings, so that tax free lump sum would be a great windfall for me.
As regards the £600 fee, .. i simply dont have that cash, .. i am stoney broke :-(

dunstonh

you say taking it at 55 wont help, but I am in financial dire straights, I am living a hand to mouth existence at the mo.

At 55 you get a much lower annuity rate than at say 65.

As regards the £600 fee, .. i simply dont have that cash, .. i am stoney broke :-(

you dont need to. It can be taken via the pension pot. Plus, you mention your health. That is even more reason to get an IFA to do it.

Also, (somebody told me, i don't know if this is true), but my JSA wont be affected so long as my personal pension payments are below £50 a week

The standard disregard is £5.00 a week for single people £10 weekly for couples, but a higher £20 disregard is available to the following groups:

Jobseeker's Allowance (Income based):-

* Lone parents entitled to the Family Premium (Lone Parent);
* Disabled people entitled to the disability premium;
* Certain people aged over 60;
* Carers entitled to the carer premium.

Jobseeker's Allowance (Contribution based):-

* Share fishermen.

Jobseeker's Allowance (Income based & Contribution based):-

* Members of certain specialist groups e.g. part-time fire fighters and reservists.

In Jobseeker's Allowance (Income based) couples have the first £10.00 of their earnings disregarded.

When working out benefit entitlement earnings in excess of the above disregarded amounts are taken into account on a £1 for £1 basis.

bonnie43uk

Thanks for that info, i just sent you a PM, but I'm not sure it "sent"??
So, basically, are you saying I am screwed until i hit my retirement age of 67 ( or whatever it may be)?? and there is little or no point in me taking part of it now?

bigfreddiel

basically he younger you are the less your annuity will be as you get it for longer - for example in the cs classic scheme you get a 5% reduction in pension for each year before 60 - taking it at 55 would impose a 25% reduction

at the end of the day the total paid out will hopefully for the insurabce company be the same regardless of when you take it

for example say you die at 70 and retire at 60 and you get a £10k level annuity - total paid out =£100k

now if you take it at 55 you wil get £10k - 25% or £7.5k for 15 years making a total paid out = £112.5k - only £2.5k more for the insurance company to find over 15 years

of course you can get more if you suffer ill health - this is called an enhanced annuity and can boost your pension by 25%+

hope that helps

atush

p00hsticks wrote: »

I'm not an expert so please look into it for yourself but I believe that the amount of any pensions in payment are deducted from JSA (even contributions based) so you may not be any better off weekly by claiming your pension now. Also, as dunstonh says ,the lump sum will also be taken into account for any means tested benefits (including income based JSA).

Do go to the benefits forum and ask about this. If you take the pension, and your income is reduced due to the pension- you may be no better off. And will then have permanently forever, reduced the amount you get. So don't take your pension w/o checking this important point.

In any case, at 54 you are still young so I would be trying to get a job instead.

jamesd

bonnie43uk wrote: »

My health isn't great, and I can't see me living much over 65.

Don't go with the standard pension quote you have now! It'll cost you a small fortune. Health problems that reduce life expectancy can greatly increase the amount of income you can get in the open market, quite possibly by 30% or more!

bonnie43uk wrote: »

As regards the £600 fee, .. i simply dont have that cash, .. i am stoney broke :-(

It can come from the pension pot, so no need to be concerned about that. It's about 2% and that's a competitive sort of value for this pension pot size.

Because you need to stay below income limits an IFA doing the work of advising you on annuity purchase might suggest two annuities, one that increase with inflation and one that doesn't. The one that doesn't will pay out more to help your income level until you get to state pension age, while the inflation linked one pays out less initially to help you to stay below the means test income limit but doesn't drop in purchasing power due to inflation so much, so it helps you more longer term.

However, looking at the limits dunstonh has mentioned it's not really likely to be sensible to take much of the pension pot as an annuity. You don't have to take all of it, so it's not impossible to do. You could take just enough to hit whatever means tested limit applies to you, using an inflation linked annuity purchase to do that. Enhanced annuity to reflect your health. There are some commission-charging places around that can be cheaper than £600 for smaller values, perhaps the one at Hargreaves Lansdown. £5 a week is £260 a year and that might cost you perhaps £11,000 of your pension pot to buy with a payout that increases with RPI inflation, with £3800 in cash tax free also as a lump sum, taking a total of £14,800 from a £40,000 pot. That'd help you now but still leave much of it for later. The cost is just a ballpark estimate, you'd need a real quote for what you'd need to buy that £5 a week of income. If you can handle the budgeting you'd get a bit more, or rather lower purchase price, by having the money paid out once a year instead of once a month, due to the reduces costs for the annuity provider in making small payments.