Pension pot strategy?

Nebulous2

cfw1994 said:

GunJack said:

Are you sure you'll get £12k pa from an annuity for only £55k?? That seems extremely unlikely, even on a non-increasing basis.....

I was wondering if I was the only one to read that and see this as something of an error 🧐

I would have thought annuities might in in the region of 4-7% depending on the many scenarios, which would give around £320pcm maximum, surely?!

I read it as a 5 year fixed-term annuity....

BrilliantButScary

Has your wife accessed her LGPS information. My own local authority runs a 'My Pension Online' service, where you can put in different scenarios, i.e. The age you wish to take your pension at, min/max lump sum etc. There is also the McCloud judgement to take into account. She needs to be fully informed before making any decisions.
Will your wife be entitled to a full state pension, has she obtained a forecast?

Marcon

Jon_01 said:

Marcon said:

Jon_01 said:

Pablo7474 said:

Do you mean take £1k per month from a fixed term annuity? This will trigger the MPAA so could impact future contributions. As would FAD. 

Why defer state pension and not use your DC pensions to provide the flexibility? There is a lot more info needed to answer. Income needs, salary etc

Yes to the first part. The advised said nothing about MPAA or FAD  when this was suggested to her!!

Defer the state pension because when I asked a few questions here a 3 to 4 years back I was told that was the best plan!  But I get that things change over time, and I shouldn't have assumed that was still the case.

1k is more than enough, and more than she gets paid now as she's only part time.

Seems clear we need to talk to another (better) adviser...

Not nearly as good a deal as it used to be. 

Jon_01 said:

MallyGirl said:

what is her normal retirement age for the 2 local authority plans?

She could start taking it from 55, but with deductions.  She'd prefer to wait and take it at the same time as her state pension.

What's her logic for doing so (I understand the 'non-logic' bit if it's just a case of feeling somehow that's 'neater' than taking them at different ages).

Jon_01 said:

Ok, so does this seem a good plan?

My wife wants to retire Feb next year (at age 63). She has 2 local authority plans (she worked for them twice years apart).  She wants to take those at age 67.

She also has a couple of stakeholder plans with around 75/80k in them combined.

The current thinking is, use 55k of the stakeholder to buy an annuity to generate an income of just under 1k per month for 5 years (under the tax threshold).  Leaving 20k+ in the pot, which she will continue to pay into until 67. She may then defer her state pension for a year to get the extra % (if they still do that in 2028!).   The 1k a month is more than enough combined with my own.

She has spoken to an adviser, but didn't really get much from it. The advised just seemed to want to read her script and then go...   We may go to see another...

Is there anything we've missed?   Does that appear sound??  Thanks...

What's the attraction of buying what (from your post) appears to be a fixed term single life non-increasing annuity, rather than just drawing down funds as and when she needs them? If her stakeholder is too old to offer that option, it's easy (and free) to transfer to a more modern contract, quite possibly with the same pension provider.

She could take 25% of her stakeholder pot tax free, which would avoid triggering the Money Purchase Annual Allowance - that is only triggered when someone 'flexibly accesses' any taxable cash from a defined contribution pension scheme. Alternatively, if she's not fussed about the MPAA but wants to use her full personal allowance each tax year, she could take 25% of each withdrawal tax free and the rest would be (potentially) taxable.

The logic would be that taking it before age 68 there are deductions on the income and the lump sum, and with the income from the stakeholder there is no need to start it yet.

It is indeed a fixed term single life non-increasing annuity. We just came up with it looking round at a number of plans. Because she'd like a regular income.   She did suggest it to the advisor she saw and she didn't say there was anything wrong with the idea. She said nothing about drawing down funds... which I think we need to quickly arrange to go and see someone else.

Are you sure about that, given she worked for them 'years ago'? That suggests it was before 2014, when the LGPS pension age was lower.

Drawdown could give her a regular income without committing her capital - and also flexibility should it be needed.

QrizB

Nebulous2 said:

cfw1994 said:

GunJack said:

Are you sure you'll get £12k pa from an annuity for only £55k?? That seems extremely unlikely, even on a non-increasing basis.....

I was wondering if I was the only one to read that and see this as something of an error 🧐

I would have thought annuities might in in the region of 4-7% depending on the many scenarios, which would give around £320pcm maximum, surely?!

I read it as a 5 year fixed-term annuity....

That's how I read it as well. £55k to pay out £12k pa for five years.

Pablo7474

If you are taking a fixed term annuity, are you taking the tax free cash first? Through drawdown you could use tax free cash each year to provide tax-free income. Just a thought!

Jon_01

BrilliantButScary said:

Has your wife accessed her LGPS information. My own local authority runs a 'My Pension Online' service, where you can put in different scenarios, i.e. The age you wish to take your pension at, min/max lump sum etc. There is also the McCloud judgement to take into account. She needs to be fully informed before making any decisions.
Will your wife be entitled to a full state pension, has she obtained a forecast?

She has. It can give projections, anything before age 68 give a minus - on the monthly and the lump sum. This vanishes a date after 2028 is entered.

She will get the full state pension, we've checked that on the .gov site.

Jon_01

GunJack said:

Are you sure you'll get £12k pa from an annuity for only £55k?? That seems extremely unlikely, even on a non-increasing basis.....

That's the quote give by L&G on their online system.  £55k, over a fixed 5 years give a return of around £11.800 per year.

https://retirements.landg.com/eap/dcj/#/home/get-your-online-quote

Jon_01

Albermarle said:

She has spoken to an adviser, but didn't really get much from it. The advised just seemed to want to read her script and then go...   We may go to see another...

The issue with any advisor will be that the sums involved are not very exciting for them.

£50K is pretty much the minimum, and many will not get out of bed for less than £150K. Plus you only really want advice on how best to use/reduce it. Also they can have little input  into local authority DB pensions or State pensions.

In theory you can just pay an advisor a set sum, unrelated to the funds you have, but many advisors do not subscribe to this business model and in any case would probably cost about £2K ?? The issue is that they are highly regulated and can not just give advice off the cuff ( like we can on here  ) so they have to find out everything about you, before being able to offer personal financial advice that they are liable for if it proves to be poor or wrong. 

That explains a lot, thanks.   So, how do you get an idea of what to do if you only have a small fund and just want some suggestions on what to do with it?

AlanP_2

When did she work in LG and accrue the 2 LGPS pensions?

Pensions accrued under the pre-2008 scheme had, I believe, a Normal Retirement Age of 60. Once the pension is deferred (as hers is) it benefits from inflation linked increases each year, as it will once in payment.

This means that any pre-2008 deferred pension not taken by Age 60 is gaining NOTHING over being put into payment.


Putting that aside what we have done (both with LGPS pensions) is start them a bit early and accept the actuarial reductions as the monthly sums were adequate for what we needed. 

This has left SIPPS and ISAs for "bonus" spending on long haul holidays for example.

Sarahspangles

Jon_01 said:

BrilliantButScary said:

Has your wife accessed her LGPS information. My own local authority runs a 'My Pension Online' service, where you can put in different scenarios, i.e. The age you wish to take your pension at, min/max lump sum etc. There is also the McCloud judgement to take into account. She needs to be fully informed before making any decisions.
Will your wife be entitled to a full state pension, has she obtained a forecast?

She has. It can give projections, anything before age 68 give a minus - on the monthly and the lump sum. This vanishes a date after 2028 is entered.

She will get the full state pension, we've checked that on the .gov site.

It might feel like this point is being laboured, but…. I have two LGPS pensions, one of which has 85-year rule protections. The two LGPS websites I access have different capability, one doesn’t provide a projection calculator at all and the other does. That one has only been able to calculate a projection for deferred pensions with 85-year rule entitlement for the last couple of years. Before that it would give a misleading forecast. So it’s worth checking the small print in the app if she has service from the 90s or early 00’s