My Pension arrangements - opinions please!

dunstonh

Well that last statement is certainly a teaser... care to elaborate on what those 'major changes' are as I may have missed something?

Officially there is none. However, some think tanks have been proposing an amalgamation of the ISA and pension wrappers.

Rather like the inflation linking of the LTA from 2018 - I missed that one as well so thank you, good to know that £1million isn't the hard cut off point in perpetuity.

It was indexed when it was introduced and then got pulled back down again a few years later. The LTA is a mess and makes no sense being there other than for historic pensions set up before the annual allowance was reduced.

atush

ratechaser wrote: »

OK, maybe a little bit of a simplistic calculation, but that example annuity rate would take about 63 years to fully draw down the 88k current guaranteed value. And yes, I get there are variables like indexing, but by the same token, if I took that 88k into one of my other pensions now, I'd like to think that it would also grow somewhat over then next 13 years!

For a start your beginning value is flawed. If you took 88K instead of yoru annuity, it would be 25% tax free lump sum of 22K. So you would only be taking an annuity off 66K.

But in any case you DONT NEED AN ANNUITY and can just use Draw down for the rest. Taking it as slowly or as quickly as you like. Or not taking it at all, and leaving it to a family member.

I used annuity figures as they like a DB pension give you a guaranteed sum pa for life.

but if you dont want your 2K a year (rising with an index- did you find out how much) then you would probably not be looking at annuities.

ratechaser

atush wrote: »

For a start your beginning value is flawed. If you took 88K instead of yoru annuity, it would be 25% tax free lump sum of 22K. So you would only be taking an annuity off 66K.

But in any case you DONT NEED AN ANNUITY and can just use Draw down for the rest. Taking it as slowly or as quickly as you like. Or not taking it at all, and leaving it to a family member.

I used annuity figures as they like a DB pension give you a guaranteed sum pa for life.

but if you dont want your 2K a year (rising with an index- did you find out how much) then you would probably not be looking at annuities.

Still waiting on the full data, apparently the administrators are a bit overwhelmed because the pension fund has been in limbo for the last 7 years while funding from the old bankrupt employment entity was being worked out. So could be a while before I get complete clarity here. The administrators are apparently also in the process of handing over to a new administrator...


Totally agree I don't need an annuity, and given the typical low-ish life expectancy that my family tend to have, it's really not something I'd want, as I'm probably an actuary's dream...

Aretnap

ratechaser wrote: »

Well that last statement is certainly a teaser... care to elaborate on what those 'major changes' are as I may have missed something?

At this point your guess is as good as mine... but the chancellor is consulting on a complete overhaul of the system, potentially replacing the current system with something more like an ISA - with up front tax relief scrapped, contributions made out of post-tax income, and withdrawals at the end being tax free. Possibly with a bonus "top-up" from the government to encourage you to lock up your money until old age (otherwise why would you not just use an ISA?). This is unlikely to be good news for high earners who get the most benefit from the current system, but one silver lining would be if savings in the new system weren't subject to the same lifetime allowance as the old one (no idea whether or not that would be the case).

If you read the finance pages of the press you'll find lots of speculation and opinion about the possible changes (eg here here and here), but not much in the way of hard facts. It is still possible that nothing will change.

dunstonh

Totally agree I don't need an annuity, and given the typical low-ish life expectancy that my family tend to have, it's really not something I'd want, as I'm probably an actuary's dream...

Remember that legislation changes also made changes to annuities. The death benefits are no longer limited. You can get a whole range of new death benefit options. This can allow a level of guaranteed income whilst still providing a return of funds on death.

Not saying annuity is right here but just pointing out that annuities are often misunderstood on what they can offer.

ratechaser

atush wrote: »

For a start your beginning value is flawed. If you took 88K instead of yoru annuity, it would be 25% tax free lump sum of 22K. So you would only be taking an annuity off 66K.

But in any case you DONT NEED AN ANNUITY and can just use Draw down for the rest. Taking it as slowly or as quickly as you like. Or not taking it at all, and leaving it to a family member.

I used annuity figures as they like a DB pension give you a guaranteed sum pa for life.

but if you dont want your 2K a year (rising with an index- did you find out how much) then you would probably not be looking at annuities.

Just returning to this one as I finally got the DB pension benefits spelt out... ok so assuming I take this pension at age 60 (in 18 years time), it's worth ~£2300/year with no lump sum, or ~£1900/year with a ~£12.5k lump sum. As of now, indexation is CPI based, which is pretty mean IMO, and there's a 50% spousal pension. If both I and my wife die before I take any benefits, then nothing gets paid (maybe that's stating the obvious...).

Based on that, I'm of the view that I take the £88k and invest it in one of my existing DC schemes rather than have it sitting there appreciating (or in fact depreciating!) at CPI levels for the next 18 years.

Any further thoughts welcomed! Specifically I know I'll have to get an IFA to confirm that this makes sense given the amount, so if I am being dumb because I'm still missing something, please let me know.

RC

atush

For a start, explain your LE fears. why do you think you'll die as young as your parents?

Mine died at 58 and 68, but they both smoked like chimneys. I dont.

If you dont share their bad habits, it isn't linked. What could be linked is cancer (due to faulty genes as opposed to lifestyle issues like smoking or drinking).

ratechaser

atush wrote: »

For a start, explain your LE fears. why do you think you'll die as young as your parents?

Mine died at 58 and 68, but they both smoked like chimneys. I dont.

If you dont share their bad habits, it isn't linked. What could be linked is cancer (due to faulty genes as opposed to lifestyle issues like smoking or drinking).

Well, there are the dozens of moles on my right arm for starters... but seriously, I clearly do hope to live a long full life, even if my family history isn't the greatest in terms of heart attacks, high blood pressure, strokes etc... alas I work in a pretty high stress industry, so I'm really thinking that the bird in the hand here is not a bad idea. And assuming I can get a 5% annual return over the next 18 years, that 88k grows to nearly 212k. I suppose CPI COULD beat my own efforts here, but I wouldn't be putting money on it!

atush

but the heart attacks and strokes might be related to lifestyle factors like smoking or drinking- you dont say.

Have you had your BP taken/monitored?

Yeah, I have too many moles on my arm (although with some it is hard to tell if moles or freckles ). I have always had loads of freckles, esp when growing up int he USA (with all that sunshine).

Not any extras so much since I moved here. But as they say the damage has been done.

ratechaser

atush wrote: »

but the heart attacks and strokes might be related to lifestyle factors like smoking or drinking- you dont say.

Have you had your BP taken/monitored?

Yeah, I have too many moles on my arm (although with some it is hard to tell if moles or freckles ). I have always had loads of freckles, esp when growing up int he USA (with all that sunshine).

Not any extras so much since I moved here. But as they say the damage has been done.

Not a smoker myself, but drinking and generally 'good' living is there, goes with the territory in my industry. BP tends to be a little high, but otherwise I'm not a hypochondriac, honestly. But the fundamental point is - shouldn't I realistically expect to get a return on 85k over the next 18 years (taking into account the cost of mandatory IFA advice) that would give me at least as good an income as the DB scheme currently offers, especially given the rather parsimonious CPI indexing? And with the added security of having the money in hand, just in case the worst were to happen to me?

Believe me, I never thought I'd ever be considering this seriously, I've been brought up to see final salary schemes as being close to priceless!