Small ex SERPS pension options?

wellspurs

I have had a dormant ex SERPS pension that is due to mature next month on my 65th birthday.

  The pot is worth £16,560: My options are get an annuity, take a fixed term retirement plan or just take the cash?
  I'm lucky that I wont be relying on this income as I have a good workplace pension and state pension next year.

 1 Working on living till I'm 80 I got a quote for a 15 year retirement plan which would pay £80 per month=£14,400 over the 15 years taxed at 20%
 2  An annuity which would pay £61 per month for life but I'd get £11084 if I live till I'm 80 also taxed at 20%
 3 Finally full cash out 25% tax free and 75% taxed at 20% = £14,076

Have I worked this out correctly? If so it seems to me it makes sense to take the cash invest it to try to keep up with inflation?

Linton

Is there a good reason to base your calculation on only living until you are 80? Average  life expectancy for someone aged 65 is about 20 years. So there is a 50% chance you will live longer. Unless you have life limiting ill health, for planning purposes it makes sense to assume you will live to your 90s.

If you do have a reduced life expectancy you should be able to get a higher annuity rate than normal.

Other than taking the cash or buying some form of annuity, if you don’t need the money you could just leave it invested.

Kim1965

Agree, you could get £55pm in dividend income and have a good chance of investment growth. Just no gaurentees. 

xylophone

If the pension does not offer flexibility and you choose not to access it, you could transfer to a modern plan and perhaps continue to contribute on the basis that it could be inherited by your beneficiaries?

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-problems/pensions-after-death#:~:text=Any assets left when you,be subject to Inheritance Tax.

dunstonh

I have had a dormant ex SERPS pension that is due to mature next month on my 65th birthday.

Pensions do not go dormant.  Only bank accounts can.      It isn't due to mature on your 65.  It would be your choice to take it on your 65th.  A legacy plan would mature at age 75 (most modern plans don't actually mature any more).

  The pot is worth £16,560: My options are get an annuity, take a fixed term retirement plan or just take the cash?

Other options:
1) don't take the pension benefits now
2) transfer to another provider

1 Working on living till I'm 80 

Thats low.  Any reason you think you will live below the average life expectancy?

Have I worked this out correctly? If so it seems to me it makes sense to take the cash invest it to try to keep up with inflation?

That would just create tax for no reason.  If you plan to invest the money then you should leave it in the pension wrapper.  Not cash it in, pay tax and then invest it again.

wellspurs

dunstonh said:

I have had a dormant ex SERPS pension that is due to mature next month on my 65th birthday.

Pensions do not go dormant.  Only bank accounts can.      It isn't due to mature on your 65.  It would be your choice to take it on your 65th.  A legacy plan would mature at age 75 (most modern plans don't actually mature any more).

  The pot is worth £16,560: My options are get an annuity, take a fixed term retirement plan or just take the cash?

Other options:
1) don't take the pension benefits now
2) transfer to another provider

1 Working on living till I'm 80 

Thats low.  Any reason you think you will live below the average life expectancy?

Have I worked this out correctly? If so it seems to me it makes sense to take the cash invest it to try to keep up with inflation?

That would just create tax for no reason.  If you plan to invest the money then you should leave it in the pension wrapper.  Not cash it in, pay tax and then invest it again.

 Thanks for your input;

 1 Not dormant but I have made no contributions or thought about it since I was 20!
 2 I think I will leave it to hopefully grow?
 3 I hope to live beyond 80 but this is the age I am using to compare options. Also I probably wont so much money for season tickets or gym clubs then haha.
 4 My point is that my annuity and fixed term quotes don't pay out the full pot especially after being taxed as income.  The lump sum could be used or put into ISAs NS&I etc and other savings as I wont be earning in total more than £1000 in interest.

Marcon

wellspurs said:

dunstonh said:

I have had a dormant ex SERPS pension that is due to mature next month on my 65th birthday.

Pensions do not go dormant.  Only bank accounts can.      It isn't due to mature on your 65.  It would be your choice to take it on your 65th.  A legacy plan would mature at age 75 (most modern plans don't actually mature any more).

  The pot is worth £16,560: My options are get an annuity, take a fixed term retirement plan or just take the cash?

Other options:
1) don't take the pension benefits now
2) transfer to another provider

1 Working on living till I'm 80 

Thats low.  Any reason you think you will live below the average life expectancy?

Have I worked this out correctly? If so it seems to me it makes sense to take the cash invest it to try to keep up with inflation?

That would just create tax for no reason.  If you plan to invest the money then you should leave it in the pension wrapper.  Not cash it in, pay tax and then invest it again.

 Thanks for your input;

 1 Not dormant but I have made no contributions or thought about it since I was 20!
 2 I think I will leave it to hopefully grow?
 3 I hope to live beyond 80 but this is the age I am using to compare options. Also I probably wont so much money for season tickets or gym clubs then haha.
 4 My point is that my annuity and fixed term quotes don't pay out the full pot especially after being taxed as income.  The lump sum could be used or put into ISAs NS&I etc and other savings as I wont be earning in total more than £1000 in interest.

Depends how long you live. If you live well beyond 80, the picture will look very different, especially if you choose an annuity which increases annually. Have you factored in that part of your pot can be taken tax free?

dunstonh

4 My point is that my annuity and fixed term quotes don't pay out the full pot especially after being taxed as income.  The lump sum could be used or put into ISAs NS&I etc and other savings as I wont be earning in total more than £1000 in interest.

Its not a valid point as you are assuming early death and you haven't factored death benefits into account (which you would if you don't think you are going to live that long)

Why pay tax to draw the pension out and put it in the bank when you can leave it in the pension wrapper tax free and access it later (if at all depending on what your long term plans are)

SouthCoastBoy

I have a similar "serps pension", worth about 20k.im planning to take it all in one go and for that year it will be my only taxable income, so would only pax tax on around 4k of it when taking into account 25% tax free lump sum and personal allowance. Most probably will take around 65 or 66 years of age, just before state pension.

Wouldn't do it earlier as may want to contribute to more than 4k a year into a sipp.