Financial advisor catch 22

JoeCrystal

Come to think of it, does final salary pension schemes often come with reduced pension to the surviving spouse as well?

kidmugsy

JoeCrystal wrote: »

Come to think of it, does final salary pension schemes often come with reduced pension to the surviving spouse as well?

They do in my experience. In fact, didn't a government (Thatcher, Major, someone else?) require that they pay widows' pensions?

PensionTech

GMPs have to come with attaching spouses' pensions (although pre-88 GMPs only carry widows', not widowers', contingent benefits). Post-97 contracted-out benefits had to meet the reference scheme test which would require that there was a general provision for spouses' benefits across most of the scheme - I think the requirement was an actuarial certification that a spouse's pension of 50% of the post-commutation pension would be payable in respect of 90% of pensioners who were married at the point of either retirement or death, or something like that. I don't know of any other requirements, but in practice I've never seen a DB scheme that doesn't provide a spouse's pension - usually well in excess of these statutory minima. There are also certain minimum requirements for civil partners/same sex spouses, and many schemes offer adult dependants' pensions where there is no spouse but there is instead, for instance, a long-term cohabiting partner.

dunstonh

Now we see why the Government put these protections in place. To prevent people making very foolish decisions.

Daniel54

Happyfeet1 wrote: »

The 2 final salary pensions pay 32k per year until my demise so let's say I live 25years past retirement so until 90 the provider therefore has in effect paid out 700k to me . The income will be taxed and probably net me circa 2.2k a month so over 25 years this would be worth 660k . If I take out the pot and say that pot is 600k then 150k would be tax free and the balance would taxed partly at 40 and 45 percent less allowance etc but roughly 40% of 450k in tax .

You can take 25% tax free lump sum from your DB schemes.Let's assume these are private sector and your commutation ratio is 20:1 ( = your figures £150k)

This leaves you swapping £24k ( 75% of £32k) of inflation linked income ( plus 50% widow's pension) for £270k in cash ( 60% of £450k)

This demands a non guaranteed return on investment of nearly 9%

How many sleepless nights do you want to have in retirement ?

bigfreddiel

Daniel54 wrote: »

You can take 25% tax free lump sum from your DB schemes.Let's assume these are private sector and your commutation ratio is 20:1 ( = your figures £150k)

This leaves you swapping £24k ( 75% of £32k) of inflation linked income ( plus 50% widow's pension) for £270k in cash ( 60% of £450k)

This demands a non guaranteed return on investment of nearly 9%

How many sleepless nights do you want to have in retirement ?

You would have to be a complete idiot to want to give up £32k index linked pension for some dodgy property venture with no guarantees.

Ditto do it if you want sleepless nights, stress, and an early exit.

Cheers fj

coyrls

bigfreddiel wrote: »

You would have to be a complete idiot to want to give up £32k index linked pension for some dodgy property venture with no guarantees.

Ditto do it if you want sleepless nights, stress, and an early exit.

Cheers fj

[FONT=&quot]Well, I suppose you could have the momentary "satisfaction" after being driven to your death bed by the stress, work and anxiety of manging your property investments of knowing that you were right that:[/FONT]

if I die after 5 years of retirement my pension stops and the total paid out is only 132k ( 2.2k month ) whereas if I took the lump sum my estate would be quids in !

Even if any remaining lump sum wouldn't cover the spouse's pension provided by your DB scheme, just as the CETV won't cover the benefits to you of the DB scheme. Oh and best to continue to ignore in your calculations that your DB benefits are linked to inflation or you could be popping your clogs even earlier.

robin61

OP I would listen to the advice you are getting £32k guaranteed and index linked is going to provide you with a very comfortable retirement with the State pension to come on top of that.
You should be enjoying your retirement not worrying about dodgy tenants, repairs, new legislation or a housing market crash.
Just think about it 10 IFAs and everyone on here so far are telling you it' s madness. They can' t all be wrong.

RickyB2000

Hold on, what are people saying? Property always goes up. Houses round my way earn more than me most years. I would say buy a 1 bed flat in central London, but can't really afford that with less than half a mil to spend. Maybe a bit further out. I really don't see how you can lose.

Just don't buy an iPhone with it, that will quickly prevent you buying any sort of property.

Seriously though, why put it in property and lose all that tax? Even if a transfer was a good idea (which I believe most would agree is only in a few specific cases), wouldn't you be better off leaving it invested and drawing down enough to live off? even if the return was a bit lower, because you haven't lost a 40 odd % stack in it I bet it is pretty competitive - as well as all the same benefits for inheritance (and no CGT if left in the pension).

atush

Happyfeet1 wrote: »

The 2 final salary pensions pay 32k per year until my demise so let's say I live 25years past retirement so until 90 the provider therefore has in effect paid out 700k to me . The income will be taxed and probably net me circa 2.2k a month so over 25 years this would be worth 660k . If I take out the pot and say that pot is 600k then 150k would be tax free and the balance would taxed partly at 40 and 45 percent less allowance etc but roughly 40% of 450k in tax . So 270k to add to the 150k making 420k to invest in a property . If I said that property on average over 25years rents out at 60% occupancy and the average monthly rent is 2k then over 25 years the income from the property would be 360k plus of course the value of the property would almost certainly have doubled making the property worth circa 900k . If we assume tax on the income and 40% CGT this would still mean I would have the property plus have gained over 550k in income and property value . Of course if I die after 5 years of retirement my pension stops and the total paid out is only 132k ( 2.2k month ) whereas if I took the lump sum my estate would be quids in !

Are you really speculating that paying 180K in TAX is a good thing? And that your remaining 420K will give you the income you require?

Are you saying you wont make old bones (have poor health and will die soon)?

if you transferred to a DC pension, and took nothing but the TFLS of 150K then died, your estate would be 180K more quids in.