Taking Pension at 55

rosegirl36

I have decided to cash in two small pensions owing to splitting up with my other half. I am on a fairly low income, so to get my own place and to stay mortgage free i have no option but to cash these in,i know some people will disagree.Now i have already cashed in 1 pension which was worth £32000, taken as £8000 tax free lump sum and £100 a month income taxed at 20%.Anyway this is the part i dont understand. The second pension with Royal London is worth £46000 and they have quoted me £11500 tax free lump sum and a pathetic in comparison income of just £630 a year.How can pension 2 be worth £14000 more than pension 1 but only pay out half the income? I am seriously thinking of taking as much as i can now as a lump sump up to the 20% tax threshold and investing it my new property with the option of downsizing in the future. Any Thoughts anyone?

AnotherJoe

It would seem you arent cashing them in, you are buying annuities which at your age is usually a bad idea. Cash in means, you take the money. You are buying a pension with it (an "annuity")

It looks to me that the first pension had a protected minimum or similar so that wasn't a bad deal, it will take only 20 years to break even on that, so after age 75 its all "free" money.

Looks like the RL one doesn't have any protection so you are getting the usual poor annuity deal, first because annuities are usually poor value anyway and second because at your age they are even more so.

If you took out £1,200 a year from the RL one it would last 40 years, probably longer, most likely indefinitely.
If you'd rather have the money to invest in your house which seems fair enough you'd get the benefit of that and probably growth and can downsize later, then spread the withdrawals over two tax years to not get hit by 40% tax and spend it on that instead.

xylophone

You might consider a transfer to a SIPP, taking the tax free lump sum, then withdrawing income as required over the next however many years ( perhaps up to state pension age)so as to pay as little tax as possible.

https://www.pensionwise.gov.uk/ You could book an appointment to discuss.

Have you obtained a new state pension statement?

https://www.gov.uk/check-state-pension

Are you in your current employer's pension scheme?

Mr.Generous

I would imagine right now is not a good time to choose to buy an annuity. That's probably the difference. My 2p worth would be always take max lump sum, always take pensions early. Ask my old manager who built up his benefits by working until 62 to build up much bigger pension "so they could do everything when they retired", and they did manage one holiday when he finished work where unfortunately he died.

(just used the state pension check so thanks xylophone)

AnotherJoe

Mr.Generous wrote: »

I would imagine right now is not a good time to choose to buy an annuity. That's probably the difference. My 2p worth would be always take max lump sum, always take pensions early. Ask my old manager who built up his benefits by working until 62 to build up much bigger pension "so they could do everything when they retired", and they did manage one holiday when he finished work where unfortunately he died.

So everyone should always take their pension at 55 ? Will you be doing that ?

kidmugsy

Mr.Generous wrote: »

Ask my old manager who built up his benefits by working until 62 to build up much bigger pension "so they could do everything when they retired", and they did manage one holiday when he finished work where unfortunately he died.

And on no account ask anyone who lived a pretty high life for many years after retirement because he had built up a good pension.