Taking a short term annuity

narrowboatboy

I have a small pension with L&G from a previous job.
 As mentioned in a previous post I took 25% and left the rest.

I was advised by the good folk on here that if I took the rest as cash it would affect me paying into another pension.
The L&G pension has dropped 10% in value in the past 12 months. I made enquiries today and L&G have confirmed I could use the money left to take an annuity for 10 years.

I presently draw a pension from a job I was in for 30 years. The company I work for now has very generous pension benefits which I don't want to affect.

So my question is, could I take an annuity from L&G without affecting the pension I'm already being paid or the pension I'm currently paying in to.

I do hope this makes sense

xylophone

I was advised by the good folk on here that if I took the rest as cash it would affect me paying into another pension.

See https://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/money-purchase-annual-allowance/

If you take income from a DC pension it triggers the Money Purchase Annual Allowance in respect of contributions to any other DC pension.

With regard to DB

What about DB?

Accrual under defined benefits schemes is not tested against the money purchase annual allowance, but will be included in the test of total contributions against the annual allowance/tapered annual allowance:

The company I work for now has very generous pension benefits which I don't want to affect.

Is this a DB Scheme?

With regard to short term annuity

1If the amount of annuity can reduce, or it is a short term annuity in a capped drawdown plan that's over the Government Actuary's Department limit, the money purchase annual allowance will be triggered.  Any other type of annuity won't trigger the money purchase annual allowance.

Albermarle

The L&G pension has dropped 10% in value in the past 12 months. I made enquiries today and L&G have confirmed I could use the money left to take an annuity for 10 years.

The fact that it has dropped 10% should not be a trigger to do something ( like getting an annuity) . In fact normally when the investments are down, is when it is best not to do anything and wait for them to recover at some point.

Nearly all pension pots have dropped more than 10% this year and probably a few per cent from this time last year ( the exact time period used makes a difference). However they will normally be up significantly over the last 5 years. Some ups and downs are normal with DC pensions.

If you think an annuity is a good idea generally and part of your financial strategy, then fine. 

narrowboatboy

OK, from my limited knowledge of pensions.

The L&G scheme was a scheme where I could pay between 4-8% which the company matched, I would then get a pension based on what the total of contributions was worth (DC?)

The scheme I'm presently paying into is a council scheme where, as I understand it, I will get 1/49 of my pay as pension for every year I work. I assume this is a DB pension?

Apologies if I've go the wrong end of the stick

Linton

narrowboatboy said:

OK, from my limited knowledge of pensions.

The L&G scheme was a scheme where I could pay between 4-8% which the company matched, I would then get a pension based on what the total of contributions was worth (DC?)

The scheme I'm presently paying into is a council scheme where, as I understand it, I will get 1/49 of my pay as pension for every year I work. I assume this is a DB pension?

Apologies if I've go the wrong end of the stick

You have the right end of the stick.

Albermarle

The L&G scheme was a scheme where I could pay between 4-8% which the company matched, I would then get a pension based on build up a pot of money based on what the total of contributions was worth (DC?) + any investment growth.
A pension income could then be generated from this pot in various ways ( including an annuity) or it can be just left alone . These pension pots can be left to your heirs if you wish, which can be a useful way of reducing inheritance tax liability ( if that could be an issue) 

Added remarks in bold 

narrowboatboy

Thanks for the comments. I'll take a further look, but sounds like the best option at present is to hold fire.