Pensions are a Lottery.I have never gambled.

Mustbeananswer??

Of course the value to you of your Occupational Pension depends on how long you live.When they calculate your income from it they must have a magic age that you will live to in mind(and hope that you don't exceed it)??If you were of poor health wouldn't it be better to take a lump sum at 66 and spend it on cruises etc.

I worked for the Government at the introduction of Pension Credit and it struck me as a little odd that the people who invested in Occupational Pensions had their award of Pension Credit reduced by how much Occupational Pension they received...where is the fairness in that??

dunstonh

Pensions are a Lottery.I have never gambled.

Pensions are not a lottery. They are a tax wrapper and have nothing to do with gambling or a lottery.

Of course the value to you of your Occupational Pension depends on how long you live.

The main value is the actual value of the pension. How long you live only matters on some types of pension.

When they calculate your income from it they must have a magic age that you will live to in mind(and hope that you don't exceed it)??

Most pensions are money purchase and most people with money purchase schemes using them for income (rather than tax efficiency or trivial lump sums) will use drawdown. Most people using drawdown will use a sustainable draw rate. In those cases, life expectancy doesn't is not an issue. it is something to consider when looking at your draw rate but it doesnt change the value of the pension.

If you were of poor health wouldn't it be better to take a lump sum at 66 and spend it on cruises etc.

What is your definition of poor health? What if there is a spouse/financial dependents?
If health is an issue then you could go for a secure income with a full death benefit. Or you could go with drawdown and maybe draw more in the early years.

I worked for the Government at the introduction of Pension Credit and it struck me as a little odd that the people who invested in Occupational Pensions had their award of Pension Credit reduced by how much Occupational Pension they received...where is the fairness in that??

You will know then that the reduction rate was not 1:1 with pension credit. So, those with small pensions (and it would have to be small to qualify for pension credit) were still better off than those without. However, those people who have done proper financial planning will not be aiming to be on the breadline in retirement. Benefits are meant to be for those that cannot provide for themselves or need support. Not for those that can look after themselves.

Keep_pedalling

Perfectly fair, PC is a means tested benefit to give the poorest of pensioners a minimum income. The vast majority of those who have occupational pensions will also have built up their state pensions as well.

My elderly mother receives PC, and it's certainly not a a level of income I would want to attempt to live on, so only a fool would end up on PC if they had the opportunity to do better.

Mustbeananswer??

Thanks for your replies....dunstonh


I am not familiar with the term draw-down.I am in good health...have a partner(but we keep our finances seperate) and will have no surviving family.Whats best for me please.

GDB2222

dunstonh wrote: »

Welcome back.

Mustbeananswer??

Keep_pedalling wrote: »

Perfectly fair, PC is a means tested benefit to give the poorest of pensioners a minimum income. The vast majority of those who have occupational pensions will also have built up their state pensions as well.

My elderly mother receives PC, and it's certainly not a a level of income I would want to attempt to live on, so only a fool would end up on PC if they had the opportunity to do better.

My State Pension Forecast is only £166 or something weekly....ive been told thats the max I can get....I have about 18 months COPE.

dunstonh

I am not familiar with the term draw-down.I am in good health...have a partner(but we keep our finances seperate) and will have no surviving family.Whats best for me please.

Drawdown is one of the methods you use to draw money from your pension. It used to be used mostly by clients of IFAs but is now the mainstream option. With drawdown, you draw the money from the pension as and when you want it. Regular income, ad-hoc lump sums or combination. In the past, the most common method was an annuity but now it is a minority option. Even annuities today differ from those available before 2015 as they were allowed greater flexibility in respect of death benefits.

bostonerimus

Mustbeananswer?? wrote: »

Of course the value to you of your Occupational Pension depends on how long you live.When they calculate your income from it they must have a magic age that you will live to in mind(and hope that you don't exceed it)??If you were of poor health wouldn't it be better to take a lump sum at 66 and spend it on cruises etc.

I worked for the Government at the introduction of Pension Credit and it struck me as a little odd that the people who invested in Occupational Pensions had their award of Pension Credit reduced by how much Occupational Pension they received...where is the fairness in that??

Pension amounts are calculated using life expectancy tables. Actuarial science has been around since the 17th century when the maths was developed to show how average life expectancy on large groups of people could be used to develop insurance and pension schemes.

If you know for sure that you will dies early then it is better to take a lump sum rather than a pension income calculated using an average life expectancy. But the difficulty is that the future is unknown, even someone with a really poor prognosis could be cured so you have to make sensible decisions and when planning pension income it's usually best to be optimistic about your individual lifespan. For someone in a traditional defined benefit pension this isn't an issue as you don't get a choice, but if you are doing drawdown from a defined contribution plan you have to makes sure your money lasts for as long as you live....you don't have the cover of "the herd" that allows you to use the maths that applies to large groups to work out your pension income.

marlot

Mustbeananswer?? wrote: »

Of course the value to you of your Occupational Pension depends on how long you live...

You say you've never gambled. But what about house/car/pet/life/travel insurance?

You could say that all insurance is gambling. Most years you lose a modest amount, but you hope that the year that your house burns down you're a big 'winner' that year.

Coming back to pensions ...

• If you think you'll live longer than the actuaries are basing their quote to you on, take the annuity.
• If you think you'll die earlier, transfer out [if necessary, depending on your pension] and use drawdown - essentially using the pot as a savings account.

PS. Well done on the click bait title. Almost as good as 'He was about to retire. You'll never guess what happened next"

Malthusian

To say that an occupational (presumably DB) pension is a gamble is like saying that it's a gamble to not play the Lottery because you might have won.

Gambling / risk is about variability of observed outcomes. Not playing the lottery is not a gamble, because if my hypothetical numbers come up, I still have £2, and if they don't come up, I still have £2.

Similarly, an annuity or DB pension is not a gamble, because if I live 5 years, I get a fixed amount of money every month for life, and if I live 30 years, I still get the same money every month for life. On the other hand, if I use drawdown and take 7% a year, that is a risk, because I might run out of money and have to live on cat food for the rest of my life.

With annuities, the fact that I might die early and subsidise other annuitants is not a "risk" to me because I'll be dead, whereas living off cat food is a real risk because I'll be there to taste it.

If you knew you were in poor health and had a limited life expectancy then it would make sense to spend the money. But most people in their 60s are not in poor health. Some are, others say they are when actually they are just unfit.

Have you found out what your remaining pensions are worth yet?

Mustbeananswer??

If you know for sure that you will dies early then it is better to take a lump sum rather than a pension income calculated using an average life expectancy. But the difficulty is that the future is unknown, even someone with a really poor prognosis could be cured so you have to make sensible decisions and when planning pension income it's usually best to be optimistic about your individual lifespan. For someone in a traditional defined benefit pension this isn't an issue as you don't get a choice, but if you are doing drawdown from a defined contribution plan you have to makes sure your money lasts for as long as you live....you don't have the cover of "the herd" that allows you to use the maths that applies to large groups to work out your pension income.[/QUOTE]

Thanks to all.I am 60 early next year and still manage to play football (badly) with Lads a fraction of my age.I think I'm going to around for a while yet.I have a picture of an old football team I used to play for when I was 12 and a third of them have passed on....so I'm very grateful for my health ..I don't know what price you would put on that??

Of course if things continue I'm going to be better off taking the annuity.Many thanks to the author of the quoted paragraph....it sort of covered it all!!