How long does she need to live? Oh which scenario! :-)

TighterThanTwoCoatsOfPain

My "fag packet" numbers spun the dial in this direction, but seeing the numbers like that there isnt really any arguement..

Many thanks for the above guys... its very much appreciated.

Retired_I.F.A.

To be honest i'm a little bit scared to do this sort of comparison. I'm not armed with the full facts of the scheme/s like I once was nor do I know the individuals requirement and situation and attitude to risk well enough to have really said it's a no brainer and being out of the industry 6 or 7 years now I'm aware I'm in no way up to date with the changes that have taken place in that time. As an IFA quite frankly I wouldn't even start a comparison without fist checking whats possible not just whats on offer from the scheme as many many times when I have done I've discovered what's in writing is just one or two options of many. So please please take my "limited" view as thats all it is, with a pinch of salt and seek advice from a practicing IFA who is G60 qualified. I was G60 but as I say i'm not now so my view is worthless and this sort of decision is final theres is no going back.

Benny5.. I'll happily do simlar calculations for you on the above understanding but I'd need more info such as..
Spouses sex and age:
guaranteed term:
Are you a smoker:
in reasonable health:
Who is the final salary scheme:
other pension/ savings:

Actually i'd be moe comfortable if Dunstonh would step in here and at least comment. Where am you mate?

benny5

I appreciate your reply and fully understand your position and the distinction between advise and debate.

As to the questions raised;

Spouses sex and age: Age 57 with her own small private pension.
guaranteed term: 10 years with 50% for spouse. ( the 50% is based on full pension entitlement and no reduction will applied for the cash sum.)
Are you a smoker: No
in reasonable health: Pretty good.
Who is the final salary scheme: Mercer.
other pension/ savings: ISA's /Shares/Internet A/C total £80k.

Retired_I.F.A.

This really is an easy choice, I thought so when i saw the commutation ratio.
I wont bore you with annuitiy illustration merely say this.

£32500 invested at a 6% nett yield will provide £1460p/a (the same as 1825 pension less the basic 20% tax rate fom next year) paid yearly in advance, escalating at 4% p/a till your in you 95th year, or paid yearly in arrears, till your 99th and paid monthly somehere in between say you 97th. and the life expectancy for your age now is around 81

But.

Taking the pension now may not be advisable. I'm actually thinking you might well be better off taking the transfer value of the whole lot and putting it into a scheme of your own where the limits are the inland revenue limits on the top rung of the ladder not half way up it and on their way down.

Bit of a drastic thing to say considering this thread alone but i've clocked the other one. lol I did say not knowing all the facts was dangerous didnt I?

Pretty obvious now that you dont want to retire yet but am worried about this scheme being under review. So would I be as there is every chance benefits are going to be reduced or the scheme even closed and replaced with a money purchase plan.

Get the transfer value, get the paid up/ preserved benefits option in writing and the employers scheme rules. Get them to an IFA and get an analaysis done asap I say.

benny5

Retired_I.F.A. wrote: »

This really is an easy choice, I thought so when i saw the commutation ratio.
I wont bore you with annuitiy illustration merely say this.

£32500 invested at a 6% nett yield will provide £1460p/a (the same as 1825 pension less the basic 20% tax rate fom next year) paid yearly in advance, escalating at 4% p/a till your in you 95th year, or paid yearly in arrears, till your 99th and paid monthly somehere in between say you 97th. and the life expectancy for your age now is around 81 .

Thank you Retired I.F.A. for your feedback.

If we can park the other issues for now and concentrate solely on the 'cash for pension' exchange. Initially I thought swapping £1 of pension for £17.97 (precise amount) cash was reasonable. However, when I consider the cost of purchasing an equivalent annuity using the FAS.GOV site I find I need £54K to generate a similar amount £1812 (again this is a precise amount). So can £32,571 invested, with little risk, return £1812 P/A (linked RPI to 5%, as with the pension option).

It becomes more confusing all the time.

benny5

Retired_I.F.A. wrote: »

But.

Taking the pension now may not be advisable. I'm actually thinking you might well be better off taking the transfer value of the whole lot and putting it into a scheme of your own where the limits are the inland revenue limits on the top rung of the ladder not half way up it and on their way down.

Bit of a drastic thing to say considering this thread alone but i've clocked the other one. lol I did say not knowing all the facts was dangerous didnt I?

Pretty obvious now that you dont want to retire yet but am worried about this scheme being under review. So would I be as there is every chance benefits are going to be reduced or the scheme even closed and replaced with a money purchase plan.

Get the transfer value, get the paid up/ preserved benefits option in writing and the employers scheme rules. Get them to an IFA and get an analaysis done asap I say.

Just some background - I am in this position due to redundancy and the pension trustees agreed that those affected could, if appropriate, take early retirement. I have contacted the scheme administrators seeking confirmation that the early retirement condition would still be an option while in deferment up to 65. There response was less than reassuring. They stated that under the current rules it was possible but subject to the trustees' consent. When I pressed them of this issue they commented that these conditions could indeed vary.

Now I have spoken to two IFA's selected from unbiased.com (pension qualification) the result was, as I perceived it, two completely opposite views. I provided the same information to both (spread sheet detailing projected outgoing/income/savings/pension projections/severance pay for investment) together with my low tolerance to risk.

Broadly speaking this summarises their views.

IFA 'A' Suggested I take all pensions now (precaution against scheme changes especially as a deferred member), take the maximum cash and drip feed into cash ISAs (including spouse) using online A/C to gain maximum interest in the interim.
On the severance pay the preference was to place all of the taxable element into my AVC. (A portion was subject to 40% tax)

IFA 'B' Suggested I defer all pensions and invest my severance in 'Collective investment' where the charges were 4% initial and .05% ongoing and/or Investment bonds with charges of 7.5 plus .05% ongoing. On the issue of severance pay he suggested paying tax on the total and investing as above.

With such opposing views where do you go, to another IFA and then opt for the majority.

I would like to say I have found this forum to be an oasis of information in this ever increasing pension desert.

dunstonh

IFA B is expensive. Not just a little. Massively.

See that 7.5% plus 0.5% p.a. The IFA average on collectives is 1.8% plus 0.5%. (and you have been round long enough to see me say that NMA typical is 1% plus 0.5%p.a.). That is pure greed by IFA B and that 7.5% plus 0.5% is actually an explicit charge on top of the natural. Another IFA who is on the ball could get that classed as a mis-sale. I would love to see how they could justify that level of commission and an explicit charge on top. Its a TCF breach just waiting for a complaint.

There are often multiple ways of doing things and sometimes it is a matter of opinion as to what is best. IFA A in this case would be closer to the mark in my opinion. (although I am not sure if I would use the AVC in full. However, that would depend on things we dont know here). IFA B is a disgrace.

Retired_I.F.A.

re: Parking the other issues for now.

I think it was £43500 not £54000 the figure I came up with from the site. The difference being you I presume entered 50% spouses I entered non because you said she'd recieve 50% before comutation anyway. Even so neither are a true comparison because you would only get £1825 gross and need to be a non taxpayer to get it nett. That's not going to happen if you remain in work, it may if you retire before recieving the state pension depending on any other income and it's pretty much certainly going to be taxable once you recieve the state pension at 65 which is why I worked on the nett of 20% tax figure of £1460 + rpi in the cash invested alternative. I chose 4% for rpi as I thought it to be more long term realistic even though it's almost half that today and assumed 6% as a nett yield on what is a long term investment. I consider this 2% gap between a yield and inflation to be very conservative considering a 5% gap is commonly mentioned by regulatoy bodies and it's histoically true too.

I cocked it up though !!!
I made a mistake when I took the figures from the spreasdsheet and typed them in the post (I'm a bloody amature nowadays, very sorry)

Lets correct my illustration first...

to:

£32500 invested at a 6% nett yield will provide £1460p/a (the same as 1825 pension less the basic 20% tax rate fom next year) paid yearly in advance, escalating at 4% p/a till your in you 87th year, or paid yearly in arrears, till your 89th and paid monthly somehere in between, and the life expectancy for your age now is around 81



Send me your email addy via p/m and I'll send you the spreadsheet I put together, you merely enter the initial capital, the annual initial income, the nett yield/interest rate the capital earns after any tax or tax exempt and the escalation rate applicable to the income and it displays the results.

Back in a mo when I've read your last post.

Retired_I.F.A.

I'll ditto Dunstonh 100% IFA B is a cowboy.

Glad you popped in btw, did you get my pm asking you to comment or have you just clocked the thread?

Just one question I'd like to know fo now: Have you had a TVAS report done?

benny5

dunstonh wrote: »

IFA B is expensive. Not just a little. Massively.

See that 7.5% plus 0.5% p.a. The IFA average on collectives is 1.8% plus 0.5%. (and you have been round long enough to see me say that NMA typical is 1% plus 0.5%p.a.). That is pure greed by IFA B and that 7.5% plus 0.5% is actually an explicit charge on top of the natural. Another IFA who is on the ball could get that classed as a mis-sale. I would love to see how they could justify that level of commission and an explicit charge on top. Its a TCF breach just waiting for a complaint.

There are often multiple ways of doing things and sometimes it is a matter of opinion as to what is best. IFA A in this case would be closer to the mark in my opinion. (although I am not sure if I would use the AVC in full. However, that would depend on things we dont know here). IFA B is a disgrace.

Ignoring the cost implications, which I realised were significant, its the variations in the planning strategy's that caused me the greatest concern. I failed to see any common ground on the major issues, hence my current DIY crusade. I shall require an IFA at some stage not least because I have an AVC which currently shows a better OMO return, but by then I will be better prepared to challenge any issues.