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Prudential personal pension - total confusion!

bouncydog1
Posts: 2,696 Forumite


Have had a Pru personal pension for many years. Never selected funds etc just paid small amount each month. Always understood that at retirement there would be a lump sum plus an annual pension paid monthly. Have now received letter advising pension will be paid shortly and giving details on fund value, plus 6 options for pension choice. Have to read carefully but as they plan to commence payment in one month am panicking! Will be 65 but no plans to retire until at least end of year.
Does anyone understand how this all works please. I admit that I have buried head in sand as in fortunate position of being in a DB scheme (which I have found I can either take and still work for same employer, defer and remain in scheme and build up fund or defer taking).
Does anyone understand how this all works please. I admit that I have buried head in sand as in fortunate position of being in a DB scheme (which I have found I can either take and still work for same employer, defer and remain in scheme and build up fund or defer taking).
Thank you for any help that can be provided.
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Comments
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Is the Pru scheme the DB scheme you refer to? Or is the Pru scheme a pot of money separate to your DB scheme?
You could always defer to give yourself some time to make a decision.
You can book a free appointment with Pension Wise who will talk to generally about pensions: https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise0 -
I admit that I have buried head in sand as in fortunate position of being in a DB scheme (which I have found I can either take and still work for same employer, defer and remain in scheme and build up fund or defer taking).
There is no fund with a DB scheme.
Or do you mean you have a third (defined contribution) pension linked to the DB pension?
Also are you sure you don't lose any DB pension you choose not to take at the schemes normal pension age?0 -
Thanks both. What I meant by build up DB fund, is that I can continue contributions to the DB scheme and receive a higher pension. Pru scheme is a personal pension outside of my DB schemes. I’ve gone through paperwork in greater detail and it actually gives me 6 different options to purchase an annuity. I therefore need to run all my figures and see which I will take. Advice used to be take as much cash as possible at the outset and then you had it but I’m aware now you should take what you think you need - how on earth do I work that out?0
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You normally don't need to buy an annuity if you don't want.
They have probably offered those options as you at one time gave 65 as your "retirement" age. It almost certainly isn't set in stone.
You might have to move the pension to a different provider but have you considered drawdown, where you can essentially take what you want when you want?0 -
bouncydog1 said:Thanks both. What I meant by build up DB fund, is that I can continue contributions to the DB scheme and receive a higher pension. Pru scheme is a personal pension outside of my DB schemes. I’ve gone through paperwork in greater detail and it actually gives me 6 different options to purchase an annuity. I therefore need to run all my figures and see which I will take. Advice used to be take as much cash as possible at the outset and then you had it but I’m aware now you should take what you think you need - how on earth do I work that out?
Also, again possibly outside the Pru pension, you can take the tax free lump sum in separate instalments if you wish.
In almost all cases it is far better to take the 25% tax free cash then put everything in an annuity. One cases where this may not be true is if the pension offers a Guaranteed Annuity Rate (GAR). Pensions dating back 25 years or more may have a very generous GAR so you should check if yours is that old.0 -
Ah, so they are different pensions - thanks for clarifying.
1) Get in touch with the Pru and say you don't want to take the pension yet. This will simply give you time to decide what you're going to do.
2) Book an appointment with Pension Wise as I suggested. They can talk you through pensions in general without giving specific advise.
3) Decide what you want to do. As above, you don't need to buy an annuity with this pension. You can transfer it to a drawdown plan with another provider and take it as you want. The first 25% will be tax free and you'll be taxed on the rest. If you're still working, all of the remaining 75% will most likely be taxed, so you may want to wait until you stop work before taking that.0 -
Dazed_and_C0nfused is correct - they are sending you details of your options because you are close to your selected retirement age. They can't/won't do anything until you select an option.
If you are not sure what to do, I woudl suggest that you give the Pru a call and ask if there is a Financial Adviser (FA) they can put you in touch with. I have a friend who was in an identical situation to yourself last year. He asked for an Adviser, and they put him in touch with a FA that worked with (but not for) the Pru. They can only advise on Pru products, but Pru have all the product you might need to take your pension in any way you want to do so.
I met the FA with my friend and was very impressed with their professionalism, and with the reasonableness of their charges. They were not cheap but neither were they expensive, so if you have been happy with the Pru, using their FA will get you the advice you need and they will arrange for your pension to be paid exactly as you want it. You might get a bit better value going elsewhere, but there are also risks that need to be considered.The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always try to check official information sources before relying on my posts.1 -
Always understood that at retirement there would be a lump sum plus an annual pension paid monthly. Have now received letter advising pension will be paid shortly a
All this sounds very prescriptive for a standard personal pension.
Are you sure this is what you have?
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This government website is a good resource for info and I have linked in the pages about options for taking a DC pension.
Options for using your defined contribution pension pot | MoneyHelper
However as Xylophone says, the way you describe the options that the Pru offered is a bit unusual. Normally they would say something like this
1) Take whole pot as cash
2) Buy an annuity ( guaranteed income ) with it
3) take 25% tax free and the buy an annuity with the rest of it
4) Take 25% tax free and the rest stays invested to be taken later ( known as drawdown)
5) Take ad hoc or regular payments , with 25% of each tax free and 75% taxable ( known as UFPLS)
6) Do nothing and leave the whole pot invested.
One point to be very aware of is that if you take any taxable income via drawdown or an annuity, you will be restricted on how you much you can add to your current DB pension in future.
As a point of priority, I would clarify with the Pru that Option 6 is valid ( it should be) as this will give you more time to plan and research what you want to do with this pension. If it is not an option then there must be something unusual/special about the pension that you have to take it at a certain age.0 -
xylophone said:Always understood that at retirement there would be a lump sum plus an annual pension paid monthly. Have now received letter advising pension will be paid shortly a
All this sounds very prescriptive for a standard personal pension.
Are you sure this is what you have?
First step is to understand your options. As others have already said, an appointment with PensionWise is likely to be the most useful step: https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise?source=pw#
You can then decide whether you need to go to the expense of using a financial adviser (in which case use someone independent, not tied to a particular product range). Often simply having a better grasp of things will be enough to enable you to take an informed decision for yourself.Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!0
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