Trigger getting pulled today - Anyone see any Major mistakes with my action plan???

sgx2000

Hi Everyone.

I've been trawling this board for years trying to learn as much as I can.
Many many thanks for all the advice and help over the last few years....

And today is the day it all starts....

I am 63 (64 in march)
Sallary £39,750
Current DB pension paying £7,400
Current workplace pension contributions £3,577  (with tax relief added assumed approx. £4,471)
Current Pension Value  £78,950

Action 1.  I have just arranged to drop to working 4 day week from January

Action 2.  Today!  Take £28000 from premium bonds (into bank within 3 days)

Action 3.  Add to Current Aviva pension (telephone conversation yesterday - I was told tax relief would be added immediately) so £35,000 added to existing fund
New fund value £113,950

Action 4.  Start Annuity with L&G. 
L&G online quote (inc medical) Flat, Single life, 10 year guaranty, 25% TFLS - £6,496 per year
and a TFLS of £28,000 (Back to Premium bonds for now)
This is Based upon only using £112,000 of the Aviva pension
This leaves a Residual Balance with Aviva of Approx £2000 to keep this pension open as I intend to carry on working for 2 years and my company will continue to pay into this


Does anyone see any major mistakes in this?

2nd_time_buyer

I presume your pension contributions can't be made through salary sacrifice?

g002ahe

For the annuity, I was able to negotiate a better rate with L&G just by using brokers. There is another thread on this subject which documents in some detail the potential for improved deal. The headline number for me was an annuity increase of 2-3% over going direct to L&G. The product is exactly the same between going direct and going through a broker.

In your case, this may be quite so lucrative as generally annuity quotes are slowly reducing in line with UK 15 year gilts.

sgx2000

Thanks for the replies

The current pension is a non-contributary workplace pension (probably salary sacrifice)
But tthe diffference would only be the tax relief probably too small an amount to be of concern
I am deliberately leaving a small margin of error so as to not exceed my salary.

And

I considered going through a broker, but given the small size of this pot and extra time it would take in a reducing annuity rate period - probably not really worth it

Dazed_and_C0nfused

sgx2000 said:

Thanks for the replies

The current pension is a non-contributary workplace pension (probably salary sacrifice)
But tthe diffference would only be the tax relief probably too small an amount to be of concern
I am deliberately leaving a small margin of error so as to not exceed my salary.

And

I considered going through a broker, but given the small size of this pot and extra time it would take in a reducing annuity rate period - probably not really worth it

If it's non contributory then that would mean they are employer contributions and you don't get any pension tax relief with employer contributions.

sgx2000

I do remember during the phone call with Aviva yesterday that she did say that our company policy is salary sacrifice.
But, I sort of ignored this as I always thought it was Non Contibutary 9% of salary.

I will ask in work tomorrow

On the Aviva website, it is shown as 
"Your employer's payment  -  £298.12 per month"  

2nd_time_buyer

Yes, that is  consistent with salary sacrifice. With salary sacrifice your "contributions" will show up as employer contributions. The question is whether you can increase the contributions further - some employers allow you to sacrifice down to minimum wage. If you could, it would save you the NI contributions (12%).   

... if you could, you could effectively drip feed the premium bond money into your pension via SS (whilst earning interest on the remainder). 

sgx2000

I know others have asked before at work.
And the answer from HR has always been the same
"Your pension increases in increments with service,  But, at 9% it stops and you cannot add to it"

2nd_time_buyer

sgx2000 said:

I know others have asked before at work.
And the answer from HR has always been the same
"Your pension increases in increments with service,  But, at 9% it stops and you cannot add to it"

It is slightly strange to set such a low cap, as they would also save the employer NI contributions, so you would think it would be in their interest.  

sgx2000

Action 2.  Has just been done
£28,000 cashed in from premium Bonds.
Will be in my account by next Monday

I will then immediately start the L&G annuity setup

It does  however worry me that the rates on annuities have already dropped/
More worrying is how far they will drop before the annuity is finally set up
I assume that the final rate I actually get will be the rate on 'that day' ,and that L&G will not guaranty the initial rate they have quoted?

sgx2000

2nd_time_buyer said:

sgx2000 said:

I know others have asked before at work.
And the answer from HR has always been the same
"Your pension increases in increments with service,  But, at 9% it stops and you cannot add to it"

It is slightly strange to set such a low cap, as they would also save the employer NI contributions, so you would think it would be in their interest.  

Agreed especially with 300+ employees. 'But it is, what it is'

I assume that then the  tax relief would be added to this £3,577  so,  with tax relief added approx. £4,471
Obviously not wanting to go over my lump cash payment into the Aviva pension taking me above my salary