Checking my pension decision before I do it!

SeekTruth

The option of income drawdown (and depletion of the capital)will mean gambling on when I die. If I'm "unfortunate" enough to live as long as my mother (currently 86, mobile, active) then the capital will be long gone.

Couldn't agree more. I think the first essential is to ensure that your pension + annuities provide enough to cover a comfortable lifestyle for you (+ partner if applicable - and, if there is a partner, that whichever survives longer will have enough after the first death). [This might need a bit of tinkering with your idea of a comfortable lifestyle in order to achieve.] When you have achieved this first essential then by all means start considering commutation rates, income drawdown, lump sums and all the rest.

Hope you enjoy your retirement.

fairleads

Excel wrote: »

Thanks to everyone here and your suggestions. I have spent a lot of time over the past couple of days reading about and researching your ideas and also getting annuity quotes.

I've decided to "invest" the tax free lump sum in my occupational pension (in other words I won't take it) because nothing else can match the guaranteed 5% increase each year for the rest of my life. (It definitely is 5% as I have it in my deferment statement. I left the company before they started reining in the pension benefits).

Even the best impaired life annuity quote was for £4,200 (RPI increase) which isn't enough to cover the income shortfall of £5,500 if I chose to take the tax free lump sum.

The option of income drawdown (and depletion of the capital)will mean gambling on when I die. If I'm "unfortunate" enough to live as long as my mother (currently 86, mobile, active) then the capital will be long gone.

I'm not a risk taker so stocks and shares ISA's don't appeal to me. Also the net yields quoted couldn't match my target of 5%.

I feel more confident now that I'm making the right decision so thanks again for your replies.

Naturally we must follow our heart and do what we feel is best for us. however i must point out that the net after tax difference/shortfall between the two options is not 5.5K.

Excel_2

Thanks Fairleads, I had assumed that I would have to pay tax on the annuity as well as the pension so the £5,500 I used was comparing the figures before tax on a like for like basis.