Taking pension out as cash rather than annuity. can the amounts be spread over tax years?

sololite

SonOf wrote: »

Their current product is not a legacy plan as it's coded to allow changes and on a flexible contract. Legacy plans are hard coded on software and cannot be changed easily or cost effectively.



Its a valuable rate. It also means that if the fund is over £30,000 and you still want to draw it using UFPLS or drawdown, you would need to use an adviser.

Thanks SonOf. I take your point.

sololite

Hi all. Scottish widows have now written to me detailing the guaranteed annuity rate and it all seems clear. The guaranteed annuity rate is 9.8% and I plan to take that after taking 25% as cash (apparently this percentage of the pension pot is outside of the 9.8% GAR). I have a couple of questions though. The letter says that at my retirement date when I will be 60 that it is a non-escalating single life basis and guaranteed for 5 years - my question being what happens after 5 years? does the GAR drop to something else? it goes on to say that at age 75 I must take all of the pension pot from the policy or transfer it to another plan. My question being what will be left in the pot after taking 15 years of GAR? Is this all standard industry practice and should it influence my decision to take the GAR route rather than do anything else? Thanks for all advice!

atush

lisyloo wrote: »

Depends on your health condition.
You earlier said you wanted to withdraw ASAP due to health.
If you mean you don’t expect to live very long then even 9% may not be good for you.
An annuity means you’ll get income until you die but there will be nothing left afterwards (unless there is a min payment period).
So if you died just after year 1 you’d only get 9% and that’s it.
Of course if you live for decades then it’s great.

In general that’s a fantastic rate but if you meant you don’t expect to live very long then it’s not necessarily best for you or did you mean something else? Such as being much less active in 3-4 years?

I agree this is a great rate, but you need to think about your LE. If it is a year or less, you can get it all tax free. If you will live 10+, take th annuity, if less than 10 take the TFLS and then the annuity with the 75%.

Is there any guaranteed period (some say they will pay out 5 years even if you die etc

atush

sololite wrote: »

Hi all. Scottish widows have now written to me detailing the guaranteed annuity rate and it all seems clear. The guaranteed annuity rate is 9.8% and I plan to take that after taking 25% as cash (apparently this percentage of the pension pot is outside of the 9.8% GAR). I have a couple of questions though. The letter says that at my retirement date when I will be 60 that it is a non-escalating single life basis and guaranteed for 5 years - my question being what happens after 5 years? does the GAR drop to something else? it goes on to say that at age 75 I must take all of the pension pot from the policy or transfer it to another plan. My question being what will be left in the pot after taking 15 years of GAR? Is this all standard industry practice and should it influence my decision to take the GAR route rather than do anything else? Thanks for all advice!

No the rate will not drop- it means if you die in year 2, it will still pay out 3 years worth.

There is nothing left in the Pot- the pot is spent on buying the annuity which ends when you die.

Albermarle

it goes on to say that at age 75 I must take all of the pension pot from the policy or transfer it to another plan

I think this would only apply if you do not take up the annuity /GAR and just left the pension pot as it is .

SonOf

You should also find out if they adjust the GAR to other payment methods and not just that one. Most do. Indeed, we had one last week where they not only applied the GAR to other methods but they increased the GAR based on medical information. i.e. the enhanced the GAR rate.

atush

Yes, you should explore due to your health the enhanced rate.

jamesd

sololite wrote: »

The guaranteed annuity rate is 9.8% and I plan to take that after taking 25% as cash (apparently this percentage of the pension pot is outside of the 9.8% GAR). ... at my retirement date when I will be 60 that it is a non-escalating single life basis and guaranteed for 5 years - my question being what happens after 5 years?

This means:

1. non-escalating so no inflation increases. The real purchasing power will decrease with inflation.

2. guaranteed for 5 years will make payments for 5 years even if you die first. Your estate gets the payments.

3. single life means no payments to a spouse after your death, when you die the payments stop unless it's still within the guarantee term.

Around 90% of annuities sold are like this, possibly with different guarantee periods.

Your life expectancy is a major potential catch. You should see whether SW will pay more and compare with alternative quotes.

By other payment methods SonOf meant possibly different guarantee periods or inflation linking. The longer your life expectancy, the more important inflation linking is.