Taking 100% of pension pot

remyroo

Thank you for all the comments and advice. The figures came from a statement dated April 2020 which on reading states the projected amounts for 2031 are on the assumption that you chose to buy an annuity (fund value £40,200, yearly income £1092, monthly income £91). The fund name is Series 9Av with-profit 3 s9 and the fund value at that time was £25,250.26 plus final bonus £8,646.12 total £33,896.38.
I think what he’s going to do is keep an eye on the fund value which changes daily and in June when he reaches 55 consider taking the tax free amount and possibly the following year taking the rest to pay a chunk off the mortgage.

Albermarle

remyroo said:

Thank you for all the comments and advice. The figures came from a statement dated April 2020 which on reading states the projected amounts for 2031 are on the assumption that you chose to buy an annuity (fund value £40,200, yearly income £1092, monthly income £91). The fund name is Series 9Av with-profit 3 s9 and the fund value at that time was £25,250.26 plus final bonus £8,646.12 total £33,896.38.
I think what he’s going to do is keep an eye on the fund value which changes daily and in June when he reaches 55 consider taking the tax free amount and possibly the following year taking the rest to pay a chunk off the mortgage.

Normally the investment returns will be higher than the interest on the mortgage , so you need to think carefully before doing anything, especially if you have to also pay tax on the pension withdrawals. 

remyroo

Albermarle, am I right in thinking that the investment is similar to an unit linked endowment policy (which I’ve discussed in a previous thread) with x amount of units which increase or decrease daily depending on the stock market.

Brynsam

mazworld15 said:

I'm not an expert by any means remy but we've been trying to find someone to tfr hubby's CETV to a SIPP and it's a nightmare, no IFA (so far) will do it, there's lots of threads about it.

Not relevant to this thread, but as you had found a couple of IFAs when you posted last year, suggest you go back to them: https://forums.moneysavingexpert.com/discussion/6168865/searching-for-unicorn-ifa-to-tfr-db/p1

remyroo

remyroo said:

Albermarle, am I right in thinking that the investment is similar to an unit linked endowment policy (which I’ve discussed in a previous thread) with x amount of units which increase or decrease daily depending on the stock market.

I’ve just realised it’s a with profits investment which is similar to a with profits endowment not a unit linked one. I have found the fund on the Financial Times website and can now  track its progress and make more of an informed decision on when of if to drawdown on it.

Albermarle

With profits funds are quite old fashioned and almost no new ones are started nowadays.
They are designed to smooth out the volatility of investing ,and try to still increase even during bad years , by saving up profits from previous better years . There is nothing inherently bad about them, but long term the growth tends to be modest at best , charges are higher than average and how they calculate the returns is a mystery and some people do not like that opaqueness.

hyperhypo

Also bear in mind that you could if wished transfer the WP pension in question ...did your valuation include any terminal bonus that might be added at this point, which can significantly increase the final valuation?

I transferred a similar old SERPS former Norwich Union pension (1988 vintage)  a while back into my main DC pension, foregoing any future guaranteed bonuses (4%)...might be worth checking if your WP fund has any of these enhancements too. I say this as i recall that the declared Aviva valuation was not the final transfer value, as it didn't include the terminal bonus.

Worth checking and understanding  all of these details. As others have said here ,  the make up of this type of "with profits" pensions can be difficult to fathom.

I used the combination of the transferred serps pension plus my DC pension savings, to take the 25% cash and allow me to retire earlier from work, to help fund periods between start of another db pension and state pension.

Had i not had any specific reason to access the WP fund at this past juncture i would have likely left alone, as a useful slow and steady savings element.

dunstonh

remyroo said:

Thank you for all the comments and advice. The figures came from a statement dated April 2020 which on reading states the projected amounts for 2031 are on the assumption that you chose to buy an annuity (fund value £40,200, yearly income £1092, monthly income £91). The fund name is Series 9Av with-profit 3 s9 and the fund value at that time was £25,250.26 plus final bonus £8,646.12 total £33,896.38.
I think what he’s going to do is keep an eye on the fund value which changes daily and in June when he reaches 55 consider taking the tax free amount and possibly the following year taking the rest to pay a chunk off the mortgage.

Statement projections use a range of assumptions.  This includes lower than likely investment returns, using the most expensive type of annuity (a type rarely bought) and a deduction of 2% p.a. for inflation to show it in today's spending power rather than the amount that will actually be paid.
The pension fund is almost certainly making more than the interest rate of the mortgage.  So, financially, taking the 25% to pay down the mortgage would not be the best financial option.  Make sure decisions based on misunderstanding are not made which could be detrimental to your finanances.

LHW99

Also with anything "with profits" the companies can add a penalty "market value adjustment" at times - there are usually specific dates when they guarantee not to charge one. Can be listed as MVA

remyroo

We’ve decided after taking onboard all the advice given to treat the pension as a savings investment and only drawdown on it if we need to.
Thanks for all the input and I now know a little bit about pensions which can only be a good thing!