Deferring Section 32 pension

Assettrac

Although still in work aged 67 and not in need of my Aegon S32 pension (pot £77,000), am I now at the point of giving up valuable benefits? Latest statement quotes GMP of £9000 (pre and post 88 combined) and am advised that increase is 1/7% per week or about 7.5% pa. If I defer for another year I lose £9000 and start next year at about £9700. So it would take around 13 years to recover the lost £9000 via the increased pension next year. I will then be 80 so quite close to average life expectancy. Of course I could die early too so greater chance of not clawing back the full £9000. Any thoughts?

kidmugsy

Assettrac wrote: »

I will then be 80 so quite close to average life expectancy.

Average life expectancy of a man aged 67 is (if memory serves) 87, so 80 isn't "quite close".

xylophone

Is all of the benefit made up of GMP or is there an excess?

You can take a PCLS if you wish?

Are you drawing your state pension?

When do you intend to fully retire?

http://www.financialadvice.net/s32_buy_out_plan/zone/1288

Assettrac

Kidmugsy- You're probably right although ONS says 85. While I don't need the pension right now, don't want to leave cash on the table either

Xylophone- By excess do you mean lump sum, If so the non-reserved fund being only £1300 it can be taken all in cash. Otherwise the fund of £77000 provides a GMP of £9000, and Aegon advise that to obtain the same pension in the open market would require a fund value of £266000. Checked this morning that they do not offer a PCLS under these circumstances.
I am drawing a state pension, and intend retire sometime next year with support of dividend income from owning half my company or capital from future sale of it. There must come a point tho when death occurs earlier than clawing back 100% of the deferred GMP.

xylophone

Might you leave a widow?

In your particular situation, is it worth deferring your state pension?

When Aegon come to pay the pension they must index link the post 88 by up to 3% CPI?

Is £266000 the transfer value of the S32?

You appear to have the prospect of very generous retirement provision exclusive of the S32?




You do not have any other pensions?

Is it worth exploring whether it would be worth foregoing the GMP in favour of a transfer out? This would require the advice of a Pensions Transfer specialist so not cheap.

But perhaps you are regarding this policy and state pension as the bedrock of your retirement income with the rest to play with?


Would it anyway be worth while consulting an IFA to explore your options?

https://forums.moneysavingexpert.com/discussion/comment/68874774#Comment_68874774

Assettrac

Might you leave a widow? Yes- 50% of GMP benefits

In your particular situation, is it worth deferring your state pension? Now in payment -£155 pw

When Aegon come to pay the pension they must index link the post 88 by up to 3% CPI? Yes but not so valuable as post '88 pension is currently valued at £2800, pre 88 balance £6200

Is £266000 the transfer value of the S32? No, it's the fund that would be needed to purchase the same level of annuity as the GMP, so no alternative provider is going to offer a £9000 annuity with only £77000 transfer to play with

You appear to have the prospect of very generous retirement provision exclusive of the S32?
Yes based on company remaining successful or sold at good price

You do not have any other pensions? Yes 1) small one from short employment- £210 pcm in payment
2) Aegon drawdown (25% tax free cash taken some time ago) fund value £190,000, not currently taking any income.

Is it worth exploring whether it would be worth foregoing the GMP in favour of a transfer out? This would require the advice of a Pensions Transfer specialist so not cheap. Can't see how that would benefit me due funding gap as mentioned above, and giving up valuable guarantees.

But perhaps you are regarding this policy and state pension as the bedrock of your retirement income with the rest to play with? Yes together with the second Aegon income drawdown which gives me more flexibility

Would it anyway be worth while consulting an IFA to explore your options? Fully intend to once I've put together the complete picture with mortgage, outgoings and ISA's in a spreadsheet spreadsheet

xylophone

Even though your state pension is in payment, deferment can be possible.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/372517/dwp024-102014.pdf

"You may be able to get more State Pension by putting
off your claim. This means delaying when you start to
get your State Pension, or choosing to stop claiming your
State Pension for a time. This is known as ‘State Pension
deferral’. "

It might be worth scanning the booklet to see if it would be to your advantage.

xylophone

Some discussion of deferment here https://forums.moneysavingexpert.com/discussion/5268485

xylophone

You are under 75 and still earning, had you considered continuing to contribute to a pension?

Assettrac

Xylophone, Thanks all your latest posts which appreciate and all this mixture of income streams best reviewed by an IFA as timing and tax efficiency best decided by an expert. Just one thing,-in principle is my opinion correct that I should not defer the S32 any longer as I've effectively given up 2 years of pension of around £8500pa since age 65 as now 67 and unlikely live to 95!

xylophone

Might you consider deferring state pension, taking the S32 and contributing to a pension for tax efficiency?