Pension help

KEVKJ1

I am 55 in October and plan to retire .
I am currently in a defined benefits pension.
My latest statement says my pension is £15,000 with a £50,000 lump sum but as i am retiring 10 years early it is penalised for early retirement to £7,500 and similar lump sum


Today the pension company sent me a transfer figure of £352,000.

Would I be better off taking the transfer fund and doing a annuity or drawdown ?
I also have a SSP2 contracted out fund I could add it too.
If I took a drawdown I could take £10,000 for 35 years which would take me to 90 years old

Am I missing something? advice please.

Linton

You have ignored inflation. If your £10K increased by say 2%/year you would run out of money by the time you were 82. Your life expectancy is somewhere around 87 say and you have a 50% chance of living longer. However if you took the £352K and were able to invest it sensibly, or pay someone else to invest it sensibly, it would be reasonable to assume you could get an inflation linked income of say £12K. The two figures are not completely comparable as there is the little matter of the £50K tax free should you decide to take the pension.


The downside of transferring out is that the income is not guaranteed so you could need a sizeable cash buffer to cover the times when it may be prudent not to take the income.


In order to transfer you would need by law to have received advice from a suitably quaified IFA which wont be cheap.


At first sight transferring does not seem a bad idea assuming you are prepared to take on the risks and the responsibility. Or do you have the money to support yourself, possibly alongside a part time job, for a few years until the reduction is less punitive?

KEVKJ1

I would possibly take %25 tax free of the lump sum initially.

I do not particularly need the money to support myself as we will be living abroad on wives pension and savings.

Do you have any idea what sort of amount K352 would buy a 55 year old an annuity which seems a safe option.

Paul_Herring

KEVKJ1 wrote: »

what sort of amount K352 would buy a 55 year old an annuity which seems a safe option.

To pick a random annuity provider from Google: http://www.sharingpensions.co.uk/annuity_rates.htm, for a single annuity: £15.7K level annuity (i.e. no inflation proofing,) no guarantee, £15.6K level with 10 year guarantee, or £9.3K with 3% escalation per year, no guarantee.

Linton

KEVKJ1 wrote: »

I would possibly take %25 tax free of the lump sum initially.

I do not particularly need the money to support myself as we will be living abroad on wives pension and savings.

Do you have any idea what sort of amount K352 would buy a 55 year old an annuity which seems a safe option.

From the annuity tables on the net at 55 an index linked annuity would provide roughly the same as your DB pension or a bit less after taking off the £50K for a fair comparison, which perhaps isnt that surprising.

Linton

You may find https://www.moneyadviceservice.org.uk/en/tools/annuities of interest.

CBX1985

What is your health situation and family's history of longevity? If you are not expecting a very long life, then an annuity/ drawdown might start to look more appealing.

I think otherwise the annuity option would start to fall down as the rates others have quoted are for single life and your DB will most likely offer you a spousal pension.

The fact you have mentioned a wish to take an annuity as the "safe option" however also tells me you might be best where you are. However you look at it a DB pension is usually the safe option and as you are searching for that, it would be hard to recommend a transfer unless you had very strong counter reason to do so.

AnotherJoe

KEVKJ1 wrote: »

Am I missing something? advice please.

Are there any other funds you have which will allow you to put off the date you take the DB pension and thus boost it?

kidmugsy

KEVKJ1 wrote: »

i am retiring 10 years early it is penalised for early retirement to £7,500 ...Today the pension company sent me a transfer figure of £352,000.

Subtracting the £50k from both, you will have to compare £300k of pension capital with an index-linked £7,500 per annum plus widow's pension.

A reasonable policy for the £300k might be to expect to use drawdown until about age 75-80 and then buy annuities with the capital left over.

You say you don't need the money to live on. Are you looking for a tax-efficient way of making bequests?

Your wife's pension: is it a "DB" pension (e.g. a final salary pension)?

KEVKJ1

tHANKS FOLKS I THINK I WILL LEAVE MY PENSION UNTIL IM 60 NOW,THANKS FOR REPLYS.