Royal London S2P 25% lump sum?

dunstonh

Not sure robbing your retirement to pay for lifestyle now is sensible. Even if you can see that.

Annuity income is based on age (and health). The younger you are, the less you will get. You are also missing out on another 12-13 years of fund growth and pension contributions (the pots can be combined at retirement to give you a bigger income).

jem16

jenny_123 wrote: »

Why do you think she said 25%of the annuity could it vary for different policies.

For defined contribution schemes requiring an annuity then no it doesn't vary. The 25% is always of the whole pot with the remaining 75% going to purchase the annuity.

Either she got it badly wrong or you misunderstood.

Yes its my only pension but will be paying one through my employer

The reason I asked was with a pot of £16k you would be eligible for triviality at age 60 if the value was to stay the same. Triviality allows you to take 25% tax free and the rest as a lump sum taxed as normal income.

However with another pension that would change things. You would be stupid to turn down free money from your employer though.

I also think that you would be better off using this pension for your actual retirement and waiting until that age.

jenny_123_3

dunstonh wrote: »

Not sure robbing your retirement to pay for lifestyle now is sensible. Even if you can see that.

Annuity income is based on age (and health). The younger you are, the less you will get. You are also missing out on another 12-13 years of fund growth and pension contributions (the pots can be combined at retirement to give you a bigger income).

Yes I know what you are saying but when money is tight you have a few debts its tempting

[Deleted User]

jenny_123 wrote: »

Yes I know what you are saying but when money is tight you have a few debts its tempting

You've said that you're expecting to work until you're 70 and you're just starting a pension with your current job, this seems to demonstrate you understand the value of a pension and understand it was a mistake to not contribute to one over your working life.

A very important part of pensions is the way in which they compound, if you put £10,000 into a pension at aged 20 when you come to retire it will be worth tens of thousands more than £10,000 put in at age 30. If you start again with nothing at the age of 55 you're sacrificing the value you've built up.

(The following figures are in no way representative of what you will see, they're based on rough estimates)

If you start at age 55 with £16,000 in your pension and your pension achieves average growth (5% was apparently the average in 2011) that means this year your pension will grow by £800 without costing you a penny! If you were to also contribute £100 per month and your employer contributes too (say £50 from your employer) and then you include all the tax benefits your pension could be growing by at least £2500 per year! If you take out your £16,000 pension now that growth goes down to ~£1500 per year... A few hundred pounds a year might not make a big difference to your lifestyle right now but when it comes to retirement the difference between £300 per month and £500 per month is huge!

Taking out your pension now would be a mistake, it might seem like a good idea in the short term but you'll be kicking yourself when it comes to retirement. You're not going to be 70 years old sitting on a sofa you bought at 55 thinking "I'm glad I bought this sofa because even though I can't afford to buy biscuits to go with my tea, at least my butt is comfy!" are you?