What to do?

Petula

My partner will be retiring this Autumn.  He has a 'Nest' pension pot of around £14,000 and we aren't sure what to do with it?  Should he take it all out (minus tax) and put into his savings?  We really don't understand much about annuities other than it's a lifelong payment (possibly?) and wonder if this smaller amount would even be worth considering for that? 

Just not sure which way to turn...or just leave it alone, and can you if you retire?

Thank you for any advice, it will be much appreciated 

MEM62

What other pension provision does he have?  

tacpot12

Annuities certainly can be a lifelong payment, however, £14,000 is quite a small amount. The annuity you can buy with this will be around £700 a year, but this will depend in your partner's health and whether they want the amount to increase with inflation. Inflation protection will reduce the amount substantially. 

You haven't said how old your partner is and whether they and you have a full entitlement to the state pension. 

He can leave the money invested with NEST, but their withdrawal limits means that he has to withdraw a minimum of £200 a month until the pot is down to £2000, then he will have to take it all out. It should take at least six years to withdraw £12,000 from NEST at £200 per months, because while the money is left invested with NEST it should continue to grows so the growth will allow them to have the income for longer or to increase the withdrawals to keep pace with inflation (which will reduce the time it will last to closer to 5 years providing they only increase their withdrawals modestly). But if they want to spread the money out over a longer period, then they might need to move the money to another provider with a lower withdrawal limit. 

You have also not said whether you have an emergency fund. It's probably a good idea to have some money available to you for emergencies, althouh if you have a credit card, this is usually good enough to last until you can make a lump sum withdrawal from a pension to cover the emergency. 

dunstonh

 He has a 'Nest' pension pot of around £14,000 and we aren't sure what to do with it?  

How does it fit with his wider retirement planning?

i.e. other pensions, spending needs, other savings/invstments etc.

Petula

MEM62 said:

What other pension provision does he have?  

Just the state pension, which we've checked, and his forecast is £238.  There is one other very minor one that we're chasing up now, but a couple of years ago it was under £4,000

Petula

tacpot12 said:

Annuities certainly can be a lifelong payment, however, £14,000 is quite a small amount. The annuity you can buy with this will be around £700 a year, but this will depend in your partner's health and whether they want the amount to increase with inflation. Inflation protection will reduce the amount substantially. 

You haven't said how old your partner is and whether they and you have a full entitlement to the state pension. 

He can leave the money invested with NEST, but their withdrawal limits means that he has to withdraw a minimum of £200 a month until the pot is down to £2000, then he will have to take it all out. It should take at least six years to withdraw £12,000 from NEST at £200 per months, because while the money is left invested with NEST it should continue to grows so the growth will allow them to have the income for longer or to increase the withdrawals to keep pace with inflation (which will reduce the time it will last to closer to 5 years providing they only increase their withdrawals modestly). But if they want to spread the money out over a longer period, then they might need to move the money to another provider with a lower withdrawal limit. 

You have also not said whether you have an emergency fund. It's probably a good idea to have some money available to you for emergencies, althouh if you have a credit card, this is usually good enough to last until you can make a lump sum withdrawal from a pension to cover the emergency. 

He will be 66 and yes, full entitlement @ £238 per forecast.  As things stand now he will have around £25,000 in a savings account and just started an ISA in 2024 - so £20,000 in that.  
 

Petula

dunstonh said:

 He has a 'Nest' pension pot of around £14,000 and we aren't sure what to do with it?  

How does it fit with his wider retirement planning?

i.e. other pensions, spending needs, other savings/invstments etc.

The problem lies in that there really was no retirement planning as such 

Simon11

Based on what you have shared, he should really consider continuing to work from the Autumn, even if just part-time as health and life permits.

Otherwise, it could be a really challenging retirement unless you as their partner are able to support?

Petula

Simon11 said:

Based on what you have shared, he should really consider continuing to work from the Autumn, even if just part-time as health and life permits.

Otherwise, it could be a really challenging retirement unless you as their partner are able to support?

His current job will end in September, he's not against working part-time if it's needed but we realise that finding a new job at 66 is not the easiest of tasks.

poseidon1

Petula said:

My partner will be retiring this Autumn.  He has a 'Nest' pension pot of around £14,000 and we aren't sure what to do with it?  Should he take it all out (minus tax) and put into his savings?  We really don't understand much about annuities other than it's a lifelong payment (possibly?) and wonder if this smaller amount would even be worth considering for that? 

Just not sure which way to turn...or just leave it alone, and can you if you retire?

Thank you for any advice, it will be much appreciated 

This is indeed a small pot to work with, but in isolation your partner could look at Nest's guided retirement fund which they make available for pots £10k and above - see link below

https://www.nestpensions.org.uk/schemeweb/nest/retirement/retirement-options/guided-retirement-fund.html

In essence this is a UFPLS managed arrangement,  whereby Nest makes periodic payments to your partner  which are a mix of tax free cash (25٪),  and potentially taxable income at 20 %. Nest keeps a portion of the monies invested to eventually be used to buy an annuity when one hits age 85+.
 Incidentally this arrangement apparently involves Nest retaining an emergency fund ( they call it Nest Safe), but I would deem that unnecessary if I already had personal funds for that purpose.

I have no idea how effective this arrangement is, but maybe worth getting a quote from Nest as to what your partner could expect to receive each year, bearing in mind investment returns cannot be guaranteed, so payments may need to be tweaked as necessary to fulfil the funds objective.

Petula

Petula said:

MEM62 said:

What other pension provision does he have?  

Just the state pension, which we've checked, and his forecast is £238.  There is one other very minor one that we're chasing up now, but a couple of years ago it was under £4,000

He's just found the other one, through AEGON (?) and it's for £7,400 as of today's valuation.