Late husband's pension

topyam

My late husband had a pension (approx £100k), which is now mine.

They say it falls outside the estate, whatever that means..

I have a choice as to how you receive the funds, your options are as follows:

1. Take it all as cash.

2. Buy a guaranteed income.

3. Transfer it to another provider.

4. Take a flexible income.

No idea what to do.

What is the most savvy thing to do?

I don't work. Have maxed out my SIPP this tax year (£2880 in). Have maxed out ISA too.

Keep_pedalling

It is difficult to advise with no information about your current financial situation, but as you are contributing to a SIPP it sounds like you have more than enough income to meet all your day to day needs so option 2 might not be the best. What do you have in the way of savings? Do you have any short to medium plans that require a large cash outlay (house move, pay off mortgage)? Is your currrent net worth likely to leave your estate in IHT territory?

Hoenir

Whatever you do needs to be in the context of your own wider personal financial circumstances and objectives. There's no right or wrong answer. 

DRS1

Think about the tax treatment of the payments - was your husband over 75 when he died or was he younger?

Falling outside the estate just means it is free from IHT but there could be income tax to pay.

tacpot12

As Keep_pedalling says, it's difficult to suggest the best course of action without more information about your current financial situation and how this might change in future, e.g. with care needs. 

As an alternative to providing more information here, you could seek help from a friend or family member, or you could make a list of the Pros and Cons of each of the options, and just keep researching these until you feel you can make a decision. Don't get stuck though! I would suggest that you need to decide what to do within a month or so, but this is long enough to apprecaite the difference between the options.  

xylophone

Re tax

https://www.gov.uk/tax-on-pension-death-benefits

You say that you do not work.

What is your situation regarding income tax?

cantbelieveit23

As others have said, we probably don't know enough of your long term plans.  However, I would agree, don't buy a guaranteed income.  I was forced into buying an annuity (long time ago so irrelevant today), and I would have to live to around 95 to receive all the money in the original pot (which does not take account of the loss through inflation over time).  As you don't work, I assume you have your full PA to work with.  Flexible income: does that mean you could take a sum equivalent to your PA each year and leave the rest invested?  And/or take £20k each year into ISA?

El_Torro

Don't rule out an annuity straight away. Annuity rates haven't been this good since 2008. That doesn't necessarily mean that an annuity is the right course of action though, just worth considering.

SmokeysTravels

You’re entitled to a free hours appointment with Pension Wise. They can explain how each option works in plain English and provide you with guidance. They can’t give you advice. For that you will need to pay for a financial advisor (preferably an independent one).

dunstonh

 I was forced into buying an annuity (long time ago so irrelevant today), and I would have to live to around 95 to receive all the money in the original pot (which does not take account of the loss through inflation over time). 

Which is largely irrelevant as the OP would not be buying annuities a long time ago but would be looking at them now.  It would be today's pricing that matters, and annuity rates are at recent highs at that moment.

From what you are saying, it suggests you bought yours post  credit crunch when gilt yields were at 300-year lows.  The previous low was in 1897 when 10 year gilt yields fell to 1.92%.  They dropped to 1.54% in January 2012 and stayed low until January 2020 at 0.14%.  Just note that for a moment. 300 years of records with the previous low of 1.92% over 125 years ago, and there they were in 2020 at 0.14%.   Currently they are at 4.52%.

topyam

About £350k in easy access accounts
£10k in fixed

I have a £150k mortgage at near 5% that I think I will pay off.

Have an old £50k pension from a previous employer which I have not touched since I left

My husband was young.

Have my full PA.

Think that answers all q. Am mid 40s with 4 kids.