Are pensions capital?

jem16

r_i_c wrote: »

That's my concern - I don't want financial advice if that advice turns out to be giving all my funds to them, especially if we are talking multiple advisers.

I would think one adviser would be the way to go, not multiple. I only meant see 2/3 to see who you would be most comfortable with and what their charges are.

Otherwise, all the shares mum held - after the dreadful tax paid - all the remaining shares are transferred into my own name, and should start paying interest after a month or so. I don't actually see what more advice I would need?

Most will be dividends rather than interest. As to advice that would depend on whether you're happy to DIY or not.

My modest TPS comes in this approaching March and I have to take it, it does not appreciate with time or by being deferred (I was told). I think it actually states this on the forecast.

As NRA for your TPS is 60, then you don't gain by deferring. You would only be losing out by not taking it.

My state pension comes in at age 67, and I won't touch my SIPP till I'm 70. That way there should be enough in the pot for my seriously senior years, if I roll out the pensions instead of taking them all at once.

Most people tend to need less as they get older as they are unable to travel as much. You just need to work out what you need and when.

Anyway, my investments are safe and with a reputable company. What more advice could an advisor - and for a fee - give me I wonder, apart from 'carry on and see me again in six months'?

I would expect an IFA to be looking at your whole financial picture and advising on what is best for you rather than what was best for your parents. The investments you now have may well be fine but they may not be depending on what you want to do. The adviser may well come up with a better plan with both investment and tax in mind.

However there is no guarantee in any of this so it's up to you whether or not you wish to DIY or see an IFA.

So, annuities are potentially a thing of the past, you can arrange your pension by filling in the relevant forms?

No annuities are not a thing of the past and for many people it's still going to be the best option as they want a guaranteed income for the rest of their lives. Some people will prefer the drawdown route and are happy to accept that it is higher risk to leave a pension invested.

In that case, I might as well bite the bullet now, it's only 6 months before my TPS commences, and these will probably be the leanest months in terms of income.

You can have either an annuity or drawdown now or later - the choice is yours.

These decisions are something that an IFA can help with.

r_i_c

Thanks - the confirmation about the TPS is music to my ears because otherwise I would be in dire straits decision-wise, since I lost mum. But that decision has been taken for me it seems.

Am a creative soul, I don't really have 'plans' beyond that; I am at length content to live where I now reside. I can drive, so mobile. Later years bring health care costs. Dad had mum to look after him. Mum had me to care for her. I have no-one, so my savings will equate to care one of these days.

The AVC is a small amount, it is hardly worth worrying about in terms of the wider picture. The SIPP I will certainly buy an annuity for, but that's not for another decade. Yes, I will book in with that local IFA, I owe it to myself to make sure as many 'i's are dotted and 't's crossed, it may be money well spent in the end, as is widely suggested.

r_i_c

Apologies for indecision, but I have been wondering what the difference would be between the Prudential paying out my AVC (would they do this?) and buying an annuity for it? On reflection, I have got that 6 month gap between where I am now and the TPS. Perhaps I really ought to help fill it with the AVC - where it will certainly come in handy - instead of relying on finite capital elsewhere?

It is the tax free lump sum which would help bridge those six months for me, the annual amount involved is relatively slight, but everything helps - as they say.

Have also emailed Prudential because despite their AVC web page advice, the actual mechanics of releasing the AVC are unclear to me.

http://www.pru.co.uk/rz/teachers/england-wales/avcs/taking-your-benefits/

Thanks.

jem16

r_i_c wrote: »

Apologies for indecision, but I have been wondering what the difference would be between the Prudential paying out my AVC (would they do this?) and buying an annuity for it?

Looking at their fact sheet, the Prudential seem to be offering you 4 main choices.

1. Take your 25% tax free and the remaining 75% as one lump sum which will be taxable depending on your circumstances.

2. Take lump sums as and when you want with 25% of that being tax free and 75% taxable. There seems to be a minimum of £2000 which must be taken and it must leave a minimum of £5000 in the pot.

3. Take your whole 25% tax free lump sum and purchase an annuity with the rest. Prudential may not be the best place to buy an annuity from though.

4. Take the 25% tax free and transfer the rest to a provider that will allow you to take the remainder as and when you wish. It appears that the Prudential isn't allowing this option themselves.

More info here ;

http://www.pru.co.uk/pdf/TAVK0789.pdf

It is the tax free lump sum which would help bridge those six months for me, the annual amount involved is relatively slight, but everything helps - as they say.

You may have to transfer out of the Prudential if you just want to release the 25% tax free lump sum and leave the rest.

atush

If you will be buying annuities with your DC pension funds, I would consider de risking your portfolio beginning with 5 years to go?

r_i_c

jem16 wrote: »

~ the Prudential seem to be offering you ...

4. Take the 25% tax free and transfer the rest to a provider that will allow you to take the remainder as and when you wish. It appears that the Prudential isn't allowing this option themselves.

More info here ;

http://www.pru.co.uk/pdf/TAVK0789.pdf

You may have to transfer out of the Prudential if you just want to release the 25% tax free lump sum and leave the rest.

Many thanks. Yes, it's number 4 I'm looking at because that will leave a small but useful regular amount coming in whilst the 25% will cover me between now and March when I retire.

With regard to transferring out, it looks like another letter to HL might be useful, and I can ask them straight if option 4 would be possible with them or that I could transfer the AVC to my SIPP while still releasing the 25% AVC tax free amount? I think it's important I preserve the 'tax free' element here - if I withdraw the whole lot and then reinvest it with HL I will have lost the tax free element I should think?

r_i_c

atush wrote: »

If you will be buying annuities with your DC pension funds, I would consider de risking your portfolio beginning with 5 years to go?

Thank you and I'm not quite sure what you mean here? What is DC please?

Meanwhile, I have identified a local IFA regulated by the Financial Conduct Authority & entered on the FCA register, so they look reputable and reliable. I may phone them next week.

My problem is that I have worked tirelessly to preserve the investments dad set in motion over two years ago - & after the recent, substantial hole left by inheritance and property tax - but am now faced with terra incognita. Mum and I sadly never had the chance to discuss contingencies.

jem16

r_i_c wrote: »

Many thanks. Yes, it's number 4 I'm looking at because that will leave a small but useful regular amount coming in whilst the 25% will cover me between now and March when I retire.

Then Number 3 will also fit the bill as that describes an annuity.

Where Number 4 has an advantage is that it allows you to take ad hoc amounts as and when you want whilst leaving the pot invested.

So what is it that you want? An annuity which gives a guaranteed amount every month until you die or drawdown where the pot remains invested and you suit yourself what to have and when?

With regard to transferring out, it looks like another letter to HL might be useful, and I can ask them straight if option 4 would be possible with them or that I could transfer the AVC to my SIPP while still releasing the 25% AVC tax free amount?

There's no need for a letter to HL. You can do either;

1. Take the 25% from Prudential and transfer the 75% to HL but making sure that HL understand it's the taxable amount that's being transferred.

2. Transfer the whole pot to HL and then do what you want.

OR;

3. Transfer (all or part )to a totally different provider that will allow drawdown.

I think it's important I preserve the 'tax free' element here - if I withdraw the whole lot and then reinvest it with HL I will have lost the tax free element I should think?

That depends on what you mean by "tax free" element exactly.

If you withdraw the whole lot you will get 25% tax free and 75% is taxable. How much tax depends on your total income when you take it.

If you take only the 25% tax free, the rest is taxable no matter what you do with it when you come to withdraw it.

However transferring it to another pension will allow it to grow tax free but you will still pay tax on withdrawal.

You said earlier that you didn't feel you needed advice from an IFA. I'm glad that you're going to see one as it does really sound like you do need advice. Please don't take that the wrong way as it's not intended to be a criticism.

jem16

r_i_c wrote: »

Thank you and I'm not quite sure what you mean here? What is DC please?

DC is Defined Contribution pension schemes. Your Teachers' pension Scheme is a Defined Benefit scheme, your SIPP and AVC are Defined contribution.

Meanwhile, I have identified a local IFA regulated by the Financial Conduct Authority & entered on the FCA register, so they look reputable and reliable. I may phone them next week.

A very good idea. Are they a small company or a large national company?

atush

r_i_c wrote: »

Thank you and I'm not quite sure what you mean here? What is DC please?

Meanwhile, I have identified a local IFA regulated by the Financial Conduct Authority & entered on the FCA register, so they look reputable and reliable. I may phone them next week.

My problem is that I have worked tirelessly to preserve the investments dad set in motion over two years ago - & after the recent, substantial hole left by inheritance and property tax - but am now faced with terra incognita. Mum and I sadly never had the chance to discuss contingencies.

DC has been explained so i'll go with the rest.

Having read your thread, I really feel that DIY might not be the way to go for you, as you seem so confused and hesitant (which is ever understandable). So an IFA might be best.

But your remarks on your fathers investments make me think you are being very emotional about this- and investments should not be married to emotion.