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Can i cash in a pension?

Hi
I was hoping someone may be able to assist with my Pension query, as to be perfectly honest, I know nothing about them!

I used to work for a Bank, and when i joined in Nov 94 I signed up to join their Pension scheme. I left that employment in 2000.

I have been clearing out a lot of old papers & came across a pension statement from them dating back to 1999, which says my contributions have totalled £1872 & that I will receive an annual pension of £708!

My question is this: am I able to cash this in, as with a baby due imminently, this would certainly come in helpful if so...

Any advice greatly appreciated :confused:

Comments

  • Andy_L
    Andy_L Posts: 12,959 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    No, it's there untill retirement age. You can transfer it to another pension which may or may not be a good idea depending on the details
  • dunstonh
    dunstonh Posts: 118,565 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Not bad. You only paid £1872 but wil get £708 p.a. Thats a good return.

    If its a final salary scheme (many of the banks were still offering final salary schemes are that point) then that figure will increase annually roughly by inflation.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • My new IFA phoned me today with a pension projection where I'd end up with a pension pot of 500k, based on my current pension pot and future contributions of £300 per month.

    He said that it would equate to £18k a year pension (after taking out 25% tax free). He mentioned the FSA makes them base projections on a 4% inflation rate. Even so, it seems a bit low after putting away 500k!
    Mortgage Free in 3 Years (Apr 2007 / Currently / Δ Difference)
    [strike]● Interest Only Pt: £36,924.12 / £ - - - - 1.00 / Δ £36,923.12[/strike] - Paid off! Yay!! :)
    ● Home Extension: £48,468.07 / £44,435.42 / Δ £4032.65
    ● Repayment Part: £64,331.11 / £59,877.15 / Δ £4453.96
    Total Mortgage Debt: £149,723.30 / £104,313.57 / Δ £45,409.73
  • dunstonh
    dunstonh Posts: 118,565 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    He mentioned the FSA makes them base projections on a 4% inflation rate.
    Not wanting to disagree with a fellow IFA although I will if they are wrong ;)

    When using SMPI basis illustrations, the rate that is to be used is 2.5% for inflation. However, when looking at example projections as the basis of a scenario, you can use whatever rate you want providing it is fair, reasonable and possible and not higher than the higher projection rate in force at the time (9% being the currrent one for pensions). Illustrations and scenarios are two different things.

    Typically I will use 3% for inflation rather than 2.5%. 4% will lower the figure and is more cautious and that is always better than the other way round.

    If you use 4% for inflation and 7% for growth and 1.5% for charges then you are only really giving a scenario growth of 1.5% p.a. in real terms. Its certainly a possible scenario and a cautious one to work from.

    source to support my comments: FSA's COB 6.6
    http://fsahandbook.info/FSA/html/handbook/COB/6/6

    copied and pasted sections just to be totally anal ;) Actually, I know a fair bit in this area as a fought with my network on this issue about 4 years ago as I thought they were giving duff information from their compliance department and won my case relating to illustration comparisons, scenarios and examples. Plus I am studying for another exam to sit this October so its amazing how much information you pick up that you never use in real life (apart from the forums) :)

    COB 6.6.48A rule_icon.gifRate of inflation assumptions

    For pension schemes and stakeholder pension schemes, the following rates of inflation must be used when calculating type P projections or type Q projections: (1) rate of increase in the Retail Prices Index (for type P projections): 2.5%;
    (2) rate of increase in earnings (for type Q projections): not less than 1.5% in excess of the rate of increase in the Retail Prices Index in (1).
    COB 6.6.9 rule_icon.gifGeneric and stochastic projections


    (1) A firm may provide a generic projection for illustrative purposes based on a single rate of investment return only in the following circumstances: (a) in a financial promotion (other than a direct offer financial promotion) which comprises a table (or extracts from a table) published by a newspaper, magazine or other periodical publication, or by the firm itself, which compares illustrative projections from at least five product providers; or
    (b) where the purpose is to indicate the likely cost of a proposed transaction; or
    (c) to provide an estimate of the additional premium or contribution required to achieve a specified target; or
    (d) when providing a type P projection or a type Q projection.


    (2) A firm which provides a generic projection must ensure that: (a) it does not relate solely to an existing contract;
    (b) the rate of return used does not exceed the higher projection rate for its class of business;
    (c) where the rate used exceeds the middle rate by more than 0.5 percentage point, a statement is included advising why it is believed reasonable to project at such a high rate of return;
    (d) where the charges and expenses (as described in COB 6.6.23 R) of the product provider are available, they are used, or an estimate is given based on the firm's knowledge of the charges and expenses applicable to similar contracts;
    (e) it is accompanied by the written statements contained in COB 6.6.17 R; and
    (f) key features or a simplified prospectus1 are supplied in accordance with COB 6.1 to COB 6.5 (Key Features) if a recommendation is subsequently made.


    (3) A firm may issue a stochastic projection only where: (a) the purpose is to indicate a range of possible outcomes; and

    (b) either: (i) it is provided for the purpose of a proposed transaction; or
    (ii) it is provided in addition to a projection which: (A) is not a stochastic projection but which complies with COB 6.6.4 R; or (B) is a projection excepted under COB 6.6.5 R(6).



    (4) A firm which issues a stochastic projection must ensure that: (a) it is based on a reasonable number of simulations and is consistent with the economic assumptions underlying the rates of inflation in COB 6.6.48A R and the intermediate rates of return in COB 6.6.50 R and COB 6.6.51 R;
    (b) its presentation does not reduce the impact of non-stochastic projections; and
    (c) it is issued only in circumstances in which the firm has taken reasonable steps to ascertain that the customer will be able to understand the stochastic projection
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
    He said that it would equate to £18k a year pension (after taking out 25% tax free). He mentioned the FSA makes them base projections on a 4% inflation rate. Even so, it seems a bit low after putting away 500k!


    Annuity rates are very poor these days, it's the (alleged) longer life expectancy that's the main cause of the trouble. 375k would buy a 65 year old man with a wife age 63 an income of 18k rising at 3% annually with a 5 year guarantee and a 50% spouse's pension.

    http://www.fsa.gov.uk/tables

    When the time comes however, you will probably find income drawdown is a more attractive option. ;)
    Trying to keep it simple...;)
  • thanks guys. Well, so much for saving into a pension. It looks like it's going to have to savings in a mattress - or meet and woo a certain scottish lady who has just scooped £35 million on the Euro lottery.
    Mortgage Free in 3 Years (Apr 2007 / Currently / Δ Difference)
    [strike]● Interest Only Pt: £36,924.12 / £ - - - - 1.00 / Δ £36,923.12[/strike] - Paid off! Yay!! :)
    ● Home Extension: £48,468.07 / £44,435.42 / Δ £4032.65
    ● Repayment Part: £64,331.11 / £59,877.15 / Δ £4453.96
    Total Mortgage Debt: £149,723.30 / £104,313.57 / Δ £45,409.73
  • dunstonh
    dunstonh Posts: 118,565 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Remember, investment returns in a pension are no different to any other tax wrapper. The same funds are there in all of them.

    What you have today are low projection rates as the industry has realised that it is better to project low and come in higher than the other way round.

    The use of 4% inflation strips 1.5% of the return out of the equation compared to one using 2.5%. Either could happen but the higher the assumed inflation rate, the lower the end value.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Thanks Dunstonh, I was only joking - I still have my love for pensions :)

    As you say, I'd rather have a low projection and be pleasantly surprised than a high projection and be seriously disappointed.

    The projection was based on a contribution of £300 per month for the next 20 years, but that'll increase over the years anyway. I was actually quite chuffed that even contributing such a relatively low amount, I'll end up a Dollar millionaire!! :)
    Mortgage Free in 3 Years (Apr 2007 / Currently / Δ Difference)
    [strike]● Interest Only Pt: £36,924.12 / £ - - - - 1.00 / Δ £36,923.12[/strike] - Paid off! Yay!! :)
    ● Home Extension: £48,468.07 / £44,435.42 / Δ £4032.65
    ● Repayment Part: £64,331.11 / £59,877.15 / Δ £4453.96
    Total Mortgage Debt: £149,723.30 / £104,313.57 / Δ £45,409.73
This discussion has been closed.
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