Advice for Aviva Pension

BigJRock

Hi, I have an Avival Personal Pension Plan that I've had since 1989 so it's the old style plan with limited retiremnet options. I'm 64 and my pot is around £140000 so not that great and would give a low annuity. I'm interested in drawdown as I work for myself and am happy to contunue working part time.
Any advice on whether drawdown would be a good option - I'd probbaly start taking about £500 a month initially. Do I have to take my tax free sum at this time or can I delay and take it later?

Any advice welcome!

MeteredOut

No-one here can give advice, and even if they wanted to, they wouldn't be able to based on the very limited information you've provided, eg, do you have any other income and what tax would you be paying on any drawdown income, what is your expected state pension income at state pension age, are you/might you want to contribute to the pension in future etc etc

When you can take your tax free sum may depend on the plan (you say it has limited options). eg, does it allow for Uncrystallized Funds Pension Lump Sum (UFPLS) withdrawals where you can get 25% of each payment tax free? This often affords most flexibility. If you plan does not provide that, have you considered transferring it to another provider who can?

dunstonh

I'm 64 and my pot is around £140000 so not that great and would give a low annuity.

Although current annuity rates are at near 20-year highs and generally above the sustainable draw rate if drawdown is used. So if you think a hundred and forty thousand will give you a low annuity, it will give you an even lower drawdown rate if you're looking at a sustainable draw.

Any advice on whether drawdown would be a good option 

In the right circumstances, yes. In the wrong circumstances, no. You haven't given enough information to give an opinion. Although your draw rate is above the UK sustainable draw rate so you're increasing your risk of running out of money in your lifetime.

Do I have to take my tax free sum at this time or can I delay and take it later?

You can take it all up front, or you can take it on drip. If you don't need it up front, then usually taking it on drip is best.

Any advice welcome!

There is no advice here, just discussion, comments and opinions, some of which will be right, some of which will be wrong.

Marcon

Without knowing anything about the T&C of your plan, and with next to no knowledge about you, it's impossible to give any sensible reply other than suggesting you might book a free appointment with PensionWise https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise

They can't give advice but can give information and guidance, which should put you in a better position to decide how you'd like to proceed.

QrizB

my pot is around £140000 so not that great and would give a low annuity.

Looking at the current Hargreave Lansdown annuity best buy tables, £140k would buy you an RPI-linked annuity of about £7k a year, which is more than the £500 a month you're looking to draw down.

If you took 25% / £35k tax-free you'd still get an annuity of about £5k a year.

clive0510

I was in a similar position to you a few years ago when I was also looking at retirement. I sought advice on here and I had replies asking me what was my portfolio, what were my objectives, all sorts of stuff. in the end I got in touch with pensionwise. they explained everything, straight forward and in laymans terms. I contacted a company called Hill top finance, who advised me drawdown was the way forward and so that's what they did on my behalf, and that's what I'm living on now.

webmasterpolo

https://forums.moneysavingexpert.com/discussion/comment/82003479#Comment_82003479

Pension wise first I'd suggest. Then perhaps a financial adviser if you still want "advice".

Problem with an annuity is no pot left, as it's all been spent on the annuity.

Taking £500pm from the pot in drawdown means if death comes in 2 years only 12k has come out of the pot and £128k +/- growth will be inherited by family.

With the annuity death in 2 years means you've had 14k and family get £0 as you spent it on the annuity. So you lost £126,000.

It's a gamble either way.

QrizB

With the annuity death in 2 years means you've had 14k and family get £0 as you spent it on the annuity. So you lost £126,000.

That's what annuity guarantees are for. HL's table assumes a 5-year guarantee, but you can choose longer.

Albermarle

That's what annuity guarantees are for. HL's table assumes a 5-year guarantee, but you can choose longer.

From my limited knowledge of annuities, having the 5 year guarantee does not cost very much/impact the pension income.

Despite what some seem to think, dying between say 65 and 70 has a relatively low probability.

DRS1

You can get a 30 year guarantee (if you really want)

Or you can get a joint life annuity (if you have a spouse say)

webmasterpolo

Yes yes there are of course annuity guarantees, but they do cost money by reducing the income offered. So if HL included a 5year guarantee in those figures if you died in year 6 there is no guarantee left and you've lost £105k, a lot of money from a 140k starting point.

An annuity is also taxable income, while income from drawdown can be 75% taxable and 25% tax free by dripping out the tax free portion making it more tax efficient than annuity income as well.

Drawdown is also flexible, as OP is self employed in a good year the option is there to reduce income if not needed or to control tax brackets or on the flip side take more income if a bad year. An annuity pays regardless with no control.

500pm is 6k which is 4.3% of the 140k pot. It's certainly not high, if the investments do OK it'll last forever.