Advice for Aviva Pension

dunstonh

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

Indeed, so often 10 years has not much difference either.

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.

And if that is a concern, then you add a guarantee period.

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.

You buy the annuity from the 75%.The 25 cents paid out as a lump sum and that can go into stocks and share ISAs and give you effectively the same outcome as the pension using UFPLS. I.e., the annuity is the 75% payment, and you can draw from the ISA to equate to the 25% payment.

So UFPLS is no more tax efficient than an annuity with the 25% taken.

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.

If you buy the annuity outside of a platform, then yes, it lacks flexibility. However, if you buy the annuity within the platform, you get the flexibility to stop or adjust the income.

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.

For a 64-year-old, it's above the UK sustainable withdrawal rate. On modelling, it would not have a 100% success rate. Also, we don't know what the investments are. So the sustainable withdrawal rate could be even lower.

BigJRock

Thank you for your replies so far. I realise no one can advise, I suppose I'm just trying to understand things better so I can make the right choice.

My main reason for not going for annuity is I don't want to lose everything is somethng happens to me, I want to leave something for my wife who is 11 years younger than me. I'm guessing getting a joint annuity will push the amount right down.
Also, I believe I'll have some work income for some time as I'll keep ticking over even after pension age in 3 years time and of course then I'll have stat pension. So hence flexibility is appealing.

dunstonh

My main reason for not going for annuity is I don't want to lose everything is somethng happens to me, I want to leave something for my wife who is 11 years younger than me. I'm guessing getting a joint annuity will push the amount right down.

Until you get the figures, you don't know. So, ruling out options because of things you don't know is not a good idea.

Remember that drawing an amount above a sustainable level can also result in you losing the money.

LHW99

https://forums.moneysavingexpert.com/discussion/comment/82004224#Comment_82004224

OP, while the first 3 pragraphs of this are reasonable suggestions, IMO it would be preferable not to take up needingadvice's final offer. This person is a new poster (2 posts), and appears not to be an IFA (if you look at @dunstonh 's post, you will see the disclaimer at the bottom which confirms he is, and has therefore been cleared by MSE to post).

While this poster may well intend to be helpful, this could be one way for a scammer to get hold of your details. Unfortunately, these days, it is as well to be cautious.

It is not too difficult to find platform comparison cost comparisons, eg https://monevator.com/compare-uk-cheapest-online-brokers/

First you need to be sure of what your Aviva pension actually charges and what exact restrictions / benefits are attached to the policy

Marcon

OP, while the first 3 pragraphs of this are reasonable suggestions, IMO it would be preferable not to take up needingadvice's final offer. This person is a new poster (2 posts), and appears not to be an IFA (if you look at @dunstonh 's post, you will see the disclaimer at the bottom which confirms he is, and has therefore been cleared by MSE to post).

The new poster has already been banned.

BigJRock

Ok, thank for help.
I've requested a retirement pack which I should get in about a week but I think my options will be limited though I can transfer to another Aviva plan if I want to do drawdown or other options. I'll also speak to Pensionwise as I intended to anyway.

I think my real purpose of posting was really to learn more about the different options and as people have said no one can give advice as such so from now I'll just ask questions ti understand my options more.Here;s a few that come to mind
1. If I start drawdown I assume what's left just keeps stays invested and grows (hopefully!).
2. I may want my 25% tax free lump sum to pursue some dreams - if I start drawdown can I the tax free lump sum later and how would the the amount of tax free sum be determined?
3. Conversely if I take the tax free sum and don't start drawing the pension keeps growing in same way as it would have done - I assume the only difference is I can no longer pay into it?

Other information relevant to myself: If I start drawdown I may actually be able to reduce what I take in 3 years when I get my state pension if I'm still working as I do now.
Although it's risky I sort of want to live live for now while I'm relatively young and though you can't rely on it I am almost certain to get an inheritance in the next few years so am not worrying about how much pension pot I'll have left in my 80's.

Marcon

1. Correct.
2. No. If you've not taken any take free cash at the outset, you have to take (at least) 25% of each withdrawal as tax free cash.
3. You should still be able to pay into the pension depending on the T&C, otherwise just start a new pension.

DRS1

If you are going for drawdown and that involves transferring from the old plan to a new one you should ask Aviva to confirm that you would not be losing out on anything by transferring out of the old plan. Some old plans have things called guaranteed annuity rates for example. You will probably be told there is nothing but it is as well to ask at the start rather than find something later in the process.

If you want to learn about drawdown there are plenty of videos on youtube (just search drawdown or FAD or UFPLS).

Marcon

If you are going for drawdown and that involves transferring from the old plan to a new one you should ask Aviva to confirm that you would not be losing out on anything by transferring out of the old plan. Some old plans have things called guaranteed annuity rates for example. You will probably be told there is nothing but it is as well to ask at the start rather than find something later in the process.

Aviva - entirely correctly - won't answer that, because it constitutes advice. OP needs to read the documentation; that will tell them if there's a GAR or any other 'special terms'. If they can't find it, ask Aviva for the relevant information.

SVaz

You could have a lifetime or a fixed term annuity and have it within a Sipp so you can choose to take the guaranteed income or not, giving flexibility, especially when Self employed with variable income year to year.