Advise needed for small pension pot of £9k (please ignore previous post)

haveabreak

Hello

In mid October I will be 66. I have a small pension about £9k. My provider has stated I can take 25% tax free, so £2,250. This leaves behind £6,750.

The provider is offering an annuity of £394.97. "No guarantee period, no increase, paid monthly in arrears without proportion, no dependents income"

Is it better not to take the whole amount and put it in an ISA (cash or stock & shares)? As the amount will be within my personal allowance, I would not pay tax on the £6,750, correct?

My state pension starts from May 2027 and i will get £13000 a year. So my reasoning is that i should that the full amount of my private pension this tax year free now, if i can. Will the provider automatically deduct tax on the £6750? Will i have to claim it back?

I am not sure the best course of action here. I am not sure if the annuity rate offered is good either. Any help appreciated.

I currently live of savings and my husband's pension.

Please also advise how to remove my previous post which I submitted in error. Thanks.

Update: My quick calculation states that i need to live 17 years to break even on the annuity offered. That's not taking into account inflation or interest/investment returns.

mrklaw

I’d just take it an put in a S&S ISA. even if the annuity rate is reasonable, its level so inflation will make that buy less and less over the years. Its not providing an income you can live off so at least for me with a pot that size I’d get it into an ISA, invest it in something you’re comfortable with and let it grow

xylophone

The provider is offering an annuity of £394.97. "No guarantee period, no increase, paid monthly in arrears without proportion, no dependents income"

To me this does not look very inviting.

Have you contacted Pension Wise for guidance? Your pension provider may well ask.

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise/book-a-free-pension-wise-appointment

You are not yet in receipt of state pension (SPA May 2027, shortly after the start of the new tax year).

In the current tax year, is your only income savings interest?

If so, excluding any interest on ISAs, will it be £11,820 or under?

In that case, as far as I can see, if you chose to take the whole £9000 in cash, and assuming that you/spouse

had not used the marriage allowance, the £6,750 would fit within your personal allowance/starting rate for

savings/ personal savings bands and ultimately be free of tax - (the provider would almost certainly deduct

tax before payment and you would have to reclaim it).

https://www.gov.uk/apply-tax-free-interest-on-savings/how-much-is-tax-free

https://www.litrg.org.uk/savings-property/tax-savings-and-investments/tax-savings-income/personal-savings-allowance

https://taxaid.org.uk/how-to-claim-a-refund-on-pension-tax

dunstonh

The provider is offering an annuity of £394.97. "No guarantee period, no increase, paid monthly in arrears without proportion, no dependents income"

Providers often have a default option, but that doesn’t mean it’s the only one.

Is that the actual annuity quote or just a projected figure? Projections often understate the actual position.

ali_bear

You can take the whole lot in one go. You will be taxed but you can claim the tax back using a form.

DRS1

If you go to your post there is a circle with 3 dots in it on the right hand side opposite your user name. Click on that and it will give you a choice to delete a post or edit it.

I don't know if you can delete the whole thread though - maybe click report (the red bit at the bottom with a flag next to it) and see if you can see an option for deleting the thread in there (or the two could be merged though that seems a waste).

haveabreak

https://forums.moneysavingexpert.com/discussion/comment/82140714#Comment_82140714

Yes only savings interest. Not used marriage allowance - how would that be an issue? Also where did you get the figure of £11,820?

I believe form P50Z is the form i would use to reclaim the tax paid on the pension:

https://www.gov.uk/guidance/claim-a-tax-refund-if-youve-stopped-work-and-flexibly-accessed-all-of-your-pension-p50z

SVaz

Can you take the tax free cash then use monthly drawdown at £1000 for the rest? You won’t have to pay any tax then.
Or, take the whole lot in March and you shouldn’t pay tax either.

poseidon1

I tried to get a little more background on you from your past posts, to see if there were other relevant circumstances that might affect the advice whether to take the whole lot, merge with another DC pot ( if any), or take the annuity.

Sadly it seems at least two different people are using this user name, so regrettably I don't have anything to usefully add to the insights already provided.

fifeken

https://forums.moneysavingexpert.com/discussion/comment/82141156#Comment_82141156

I didn't think it was possible to have duplicate usernames?

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82141260#Comment_82141260

I dont believe there is a duplication, but an earlier thread under this username has someone else posting a couple of years ago as a 46 year old buy to let property owner with a £350,000 Sipp (obviously not the current poster, unless they have emerged from another parallel reality).

Unfortunately this would not be the first time other people ( usually other family members) take advantage of someone else's MSE account to post their query, which can lead to considerable confusion ( at least to me) in determining to whom you may be addressing your responses.

Admittedly it seems to be only an issue for me, but I now tend to steer clear when I see this happening.