In tears over my confusion with annuties

Vegastare

I am approaching 60 in several weeks and have been sent numerous letters regarding my schemes. Please forgive me if I use the wrong terms. Plus I admit I have been shying away from this, maybe it is the thought of reaching 60:(
My problem is that I have 4 schemes which are due at 60, together there total pot is under £30,000. One is a deferred NHS plan and seems simply to get 25% tax free cash then yearly with the remaining amount.

In my ignorance I thought I could phone the other two companies (would you believe I have £600 only in one scheme and £14,000 in another both same company) so as this latter seemed complex phoned the other I explained I wanted to have a tax free sum and the rest monthly. They said they could not sell me the annuity (maybe wrong wording) arrange today. Also said I could net more by going elsewhere, it was explained they must say this. With this I decided I would not phone the other, as a nervous wreck by then.

I am so confused, until this phone call I just wanted 25% tax free sum to top up my ISA and the few hundred £ a year to pay bills.
I do realize that sadly my main pension will be my state pension.

I am afraid to go to financal advisor because of the costs - a friend said it could be £100 of pounds, and if I go to pension wise will only get advice. Plus if I don't decide my 60 will I loose the right to claim

I really would welcome advice - I understand I may come across as foolish hence my hesitance.

LHW99

Please don't panic over this.

First of all you mention 4 schemes, but only three companies.

So is it right that you have
1) a small NHS plan
2) two schemes with one company, and one with another?

If so, people might be able to help more if you can tell us the names of the companies.

Firstly even if the NHS pension is small, its likely be a "final salary" scheme. That means the pension will get regular increases to keep up with inflation. Well worth having, and not something to worry about.

Secondly, it would be worth having a chat with PensionWise.
No they can't give advice, but what they can do is explain what your pensions are (the non-NHS ones are probably "defined contribution", but may not be), and how you could best access them.

You might find it better to have a face to face meeting, rather than just a phone chat.
If you do, take all the paperwork you can find with you to show them.

Finally, although there are often time limits on the quotes that are sent from your pension cmopanies, you are unlikely to lose the pensions although the choices may change.

More experienced people here will undoubtedly have extra advice.

HappyHarry

I would second LHW99's thought about speaking to Pensionwise. Giving guidance is exactly what they were set up for. They will help you to understand what you have, and what options you have.

https://www.pensionwise.gov.uk

xylophone

You have applied for your NHS pension?

This should be straightforward.

http://www.nhsbsa.nhs.uk/Documents/Pensions/Booklet_R_(V16)_online_-_08_2014_.pdf

Can you give more details of the other three pensions?

Some information about the new state pension is here

https://www.gov.uk/new-state-pension/overview

Vegastare

There are two in Egnon one a few hundred the other £14000
The next Standard Life £6000

I have already managed to onto NHS and the correct form.

I really am grateful

atush

Egnon- not heard of.

Aegon?

who did you work for?

sandsy

There's different type of pensions:
A. Defined benefit, like your NHS one, where you can get a lump sum and a fixed income
B. Ones which will build up a pension pot but then you need to decide what to do with that pot of money.

Before the recent pension changes, it was normal to 'buy an annuity' which is a type of financial product which converts the pot into a lifetime income. There's other options available now too but you can still buy an annuity of a certain income for life is what you want.

It's almost certainly worth your time to talk to PensiknWsie who will explain the different options to you. They can't tell you what to do but, if you understand the options better, you might feel more comfortable talking to your pension companies.

xylophone

You do have options about how you take these pensions - an annuity is only one of them.

Why not read through the information on the Pension Wise site first and then book an appointment?

You won't be told what to do but your options can be fully explained.

For example, it might be possible to combine the three pots into one by transferring to another provider.

You might then choose to take 25% tax free and then gradually draw down the rest to supplement your NHS pension over the next six years until you reach state pension age.

LXdaddy

Vegastare wrote: »

... I explained I wanted to have a tax free sum and the rest monthly. They said they could not sell me the annuity (maybe wrong wording) arrange today. Also said I could net more by going elsewhere, it was explained they must say this. With this I decided I would not phone the other, as a nervous wreck by then.

I am so confused, until this phone call I just wanted 25% tax free sum to top up my ISA and the few hundred £ a year to pay bills.

Vegastare - as others have posted you should make an appointment to talk face to face with Pensionwise who will provide you with "guidance" and this should resolve the confusion that you have.


With the recent pensions changes there are a number of new options available, but even before then the answer you got on your phone call would have been the same. Buying an annuity from the company where your pension fund was built up was not usually the smartest thing. It is generally true that an annuity bought "on the open market" will give a better return than one offered by the pension fund holders.


It sounds like you have three defined contribution pension pots. It should be possible to transfer the money in those three individual pots to a different institution and then use the combined value to provide your pension.


Even if you decide on taking 25% tax free and using the balance to buy an annuity you should be able to do better than the offers from the three individual funds.

jamesd

It's not too bad once you get used to it, really.

Easy one first is NHS. Just take that when it comes due. Your only real decision is whether to take a lump sum or not. Unless you have plenty of income I suggest not taking the lump sum from this.

For the others they are probably what are called "defined contribution" or sometimes called "money purchase" pensions. For these it's a good idea to take the 25% tax free lump sum. This sort of pension doesn't have any built-in income option. Instead you can buy an income in a variety of ways:

1. Annuity. This is the old-fashioned way of doing it and the pension freedoms have led to a dramatic drop in annuity sales, with the other major type of option now more popular than buying annuities. The main problem with annuities is that for those in anything close to normal good health they pay a very poor level of income compared to the alternatives.

2. Income drawdown. This is the option that has now replaced annuity buying as most popular. There are many ways to take an income using income drawdown but since you appear not to be very familiar with investing I suggest that you:

A. Transfer all three to one place. Hargreaves Lansdown is OK and offers excellent service. Not particularly cheap but that doesn't matter and it does do what you need: no charge for taking an income.

B. Look at the Hargreaves Lansdown annuity quote page and start to take an income at whatever you could get for an RPI annuity for the total amount at age 60. If these three pensions are worth exactly 330,000 and you take 25% tax free lump sum this will leave £22,500 in the pension pot. That would buy you an annual income of £22,500 / £100,000 (always divide by 100k for this table) x £2,670. That's £600.75 a year or £50.06 a month. So just tell them that you want £50 a month of regular income.

C. When you get to your state pension age, ask what your state pension will be and then defer claiming it. Tell HL to increase your monthly payment to £50 plus the monthly amount of your state pension. Once the money at HL is a couple of months from running out, claim your state pension and choose the higher income option with the deferred money.

The reason I suggest this is that deferring your state pension like this increases it by 5.8% a month for those who reach state pension age from 6 April 2016 onwards. This is close to double the guaranteed lifetime income that an annuity would provide, so it's far better value for money for those reasonably close to state pension age.

Ask Hargreaves Lansdown on the phone if you need help with this. They have excellent service for this sort of thing, making them a nice choice for people who aren't that familiar with pensions who won't be having the money in there for long. Just don't ask them if you should buy an annuity or defer the state pension: they make money from selling you an annuity but not from mentioning the state pension and they don't even mention it in their descriptions of options for retirement income!

I've assumed that you are in normal goodish health. If you aren't please say more because that can change what your best options are.

A call to pensionwise is also a good idea. Or more than one. They can answer your questions about this sort of thing, though they don't seem to be very up on the good deal of using state pension deferral for income so they might not cover that very well, or even not at all.

jem16

jamesd wrote: »

Easy one first is NHS. Just take that when it comes due. Your only real decision is whether to take a lump sum or not. Unless you have plenty of income I suggest not taking the lump sum from this.

Worth bearing in mind that if the Op is a Deferred Member of the 1995 section ( which is more than likely), then there is no option not to take the automatic lump sum which is 3 times the annual pension.

What should be avoided is taking more than this as the commutation rate of 12:1 is dire.