Annuity choice

DRS1

mlv-1967 said:

DRS1 said:

RL will get a new quote when your paperwork goes in to the provider (to extend the window for the quote as much as possible - that is the period for your pension provider to transfer the funds to the annuity provider).  It would be interesting to know if the new quote is better or worse than the first one.

The original quote was based on the current amount of funds I have. When Just Retirement start to transfer funds they will ascertain the exact amount, which will likely be higher, as my funds are now in the money market instead of stocks. On that basis they will revisit the original quote and modify it to take account of the new fund additions. 
I believe this is the process.

Sounds logical.  I am not sure it actually happened that way for me.  I don't recall the annuity figure changing even though what was transferred over would have been different to the original figure used for the quote because I left the old pensions invested.

RL didn't tell me about the later quote until I phoned up after some weeks to check on progress.  And then it was mainly in the context of well the new deadline for the transfer of funds is x (because we got a new quote).

Maybe worth a call to RL just to see if they have a new quote for you, what the deadline for transfer is now and whether everything is moving along nicely?  I mention this only because I signed the papers with RL about this time last year sent them in and then nothing happened for some time so the annuity did not start until the end of August.  All the annuity provider's fault, of course.

mlv-1967

Triumph13 said:

I have to agree with the others on the tax free lump sum.  Using it to buy income that will be taxed at 40% is very public spirited of you, but definitely sub-optimal.

Very little, if any, would be taxed at 40%.  

NoMore

mlv-1967 said:

Triumph13 said:

I have to agree with the others on the tax free lump sum.  Using it to buy income that will be taxed at 40% is very public spirited of you, but definitely sub-optimal.

Very little, if any, would be taxed at 40%.  

With frozen tax thresholds and the triple lock still in place on the state pension. You might be surprised how much 40% tax you start paying when the state pension kicks in. 

af1963

mlv-1967 said:

Triumph13 said:

I have to agree with the others on the tax free lump sum.  Using it to buy income that will be taxed at 40% is very public spirited of you, but definitely sub-optimal.

Very little, if any, would be taxed at 40%.  

The amount you're thinking about taking as extra annuity income instead of a tax free lump sum would be about 25% of the quoted annuity of £35.5k, so about £9K.

With total income at state pension age of £12k state pension ( probably more in 10 years after triple lock) plus £8.5k DB plus £35.5k annuity = £56k, that means about £6k of the £9k would already fall into 40% tax band.

With (say) 3% inflation increases on all of these bits of income, that adds about £1.5k per year to your income,

Add in a few years of these inflation increases on the pensions, with frozen tax bands, and it won't be long before *all* of the extra £9k is being taxed at 40%. Likely to happen before the existing tax band freeze ends, even if it isn't extended for longer.

mlv-1967

I'm resurrecting this thread as I am considering making a change to my plans, given that I have now found a new job. 
This would be as follows:

Take the 25% tax free lump sum, which for me would be around £191,000.
Take an indexed lifetime annuity with the remainder.
Start a new SIPP and 'drip feed' £60k a year from my savings (which would then include the £191,000) until the SIPP has fully absorbed the original tax free amount.
Pay into my new company pension scheme for two years.
Retire after the two years and transfer my funds from the company scheme into the SIPP.
Purchase a new annuity at that stage.

Is that possible?  Would I then be able claim 25% tax free from the new SIPP in two years?

LHW99

Possible problems:

Do you have enough income (gross) to put £60k (gross) towards a SIPP?

£60k will include the company pension contributions (unless you have some carry forward)

Once you retire after 2 years, you will have no salary (presumably) and pension doesn't count as income for SIPPs

What about pension recycling?

mlv-1967

The new job will pay me £66k a year.  Once I leave the job I would stop putting money into the SIPP - I might stay in the job for three years maximum.

QrizB

mlv-1967 said:

The new job will pay me £66k a year.  Once I leave the job I would stop putting money into the SIPP - I might stay in the job for three years maximum.

If you stay in the job for three full years, at £66k pa, you'll be able to contribute £198k gross (£158k net) to pensions, including any contributions to the company scheme.

Only £180k gross (£144k net) if you aren't able to carry forward £18k from previous years.