Income drawdown vs annuity purchase at retirement

EdInvestor

Kittie

Just wondered if you'd looked up the GAD tables to see what income you could take from your fund if it was in drawdown.

It's quite a lot higher than the annuity rate, as you probably know.

http://www.hmrc.gov.uk/pensionschemes/gad-tables.htm

rjs1

New member question.
I have a stakeholder pension with a current value of approx £45000, I also have a preserved pension with a local authority superannuation scheme. Would it be wise to cash in the local authrity pension add it to the stakeholder fund to increase the toatl fund to £100K and then use this total as a drwdown pension fund? I am 56 years old.

dunstonh

Would it be wise to cash in the local authrity pension add it to the stakeholder fund to increase the toatl fund to £100K and then use this total as a drwdown pension fund?

1 - it would be an awful decision
2 - you cant drawdown in a stakeholder
3 - you wouldnt want to drawdown in a stakeholder even if you could as the funds available are not good enough.

EdInvestor

Hello rjs1

rjs1 wrote:

New member question.
I have a stakeholder pension with a current value of approx £45000, I also have a preserved pension with a local authority superannuation scheme. Would it be wise to cash in the local authrity pension add it to the stakeholder fund to increase the toatl fund to £100K and then use this total as a drwdown pension fund? I am 56 years old.

What is your aim? Do you want an income immediately?

If so, the following might be more sensible:

"Take benefits" from the stakeholder by moving it to a low cost online SIPP eg the ones run by https://www.h-l.co.uk or https://www.sippdeal.co.uk. This will mean you can take 25% of the fund in tax free cash.

If there is "protected rights" money ( replacement for SERPS pension) in the fund you will have to leave this until later as it can't presently be put in the SIPP. But you can invest the remainder of the pension and take an income of 120% of the annuity rate for your age every year.This income (as it's from a pension) will be taxable, but will come within your personal allowance and 10% band.

The combination of this income and the tax free cash would keep you going for a few years.IMHO it is advisable to leave the local authority pension alone until you reach the retirement age (60?) at which point you should be able to access more tax free cash, plus the index linked pension without an onerous penalty, to add to the income from the SIPP (which should be higher now if you have invested it well).

This should further keep you going until 65 when the state pension kicks in.Under the new rules if you are due to retire after 2010 you only need 30 years conts for the basic state pension, which you probably have already.
Get a state pension forecast here, you might be surprised

https://www.thepensionservice.gov.uk

pefwin

yourpensionblog wrote:

I think that the annuities market is dead, as people now have more control over their assets - even after retirement.

While there may be more risk by managing your own post-retirement investments, compared to the low annuity rates on offer, I think it is a risk worth taking.

But only for the financial astute, post A-Day there are mid-market propositions emerging such as the Living Time Plans, which provide an income for the term of the plan allowing you to adjust your requirements at a later date post retirement.

However, I must say I agree that "5 for life" looks like an investment bond .

pefwin

h5djr wrote:

Any further news on this product?

David R

See above.

http://www.living-time.co.uk

jenko

h5djr wrote:

Any further news on this product?

David R

There is a company called MetLife who have recently launched a product which will offer you a minimum return of at least the amount you have invested via a lump sum at 75 or via income, or a bit of both.

It allows you to be invested upto 85% in equities and locks in any gains every 3 years. This means if your £100,000 pension fund has grown to £125,000 after 3 years, this is the new minumum amount you will get back at 75, minus any income.

It allows you to drawdown income if you so wish from age 55 onwards.

It is a pension product, unlike the Scot Eq 5 for Life product.

paypal_2

Martin has given power to the people with his succesful campaign to allow us to claim money which has been illegally taken by the banks/ mortgage companies/ credit card companies.

FANTASTIC- thank you Martin et al

I am about to reclaim £250 from Abbey and am confident of success.

I have another challenge.

Some years ago NPI froze my not insignificant pension fund . Today it ha s the same £ amount recorded whilst the FTSE and other market indicators are reaching record heights.

I am therefore losing out significantly and should I choose to withdraw the fund the industry's fine for this ( they give it a three letter acronym to make it look very official) will punish me even more.

My challenge is finding how I might be able to encourage NPI -- or the current administrators of the pot, Pearl--- to increase and to unfreeze my pot. Have they done any thing illegal?

I recognise the uphill struggle of those taking on Equitable

paypal ( no relation!)

EdInvestor

Hi paypal

Have you checked whether there is a valuable guarantee attached to your pension?(Could be a Guaranteed Annuity Rate (GAR) or Guaranteed Minimum Pension (GMP).This might be a reason the fund is showing no apparent growth: is it perhaps already going to pay out much more than you would get on the market when you claim the guarantee?

dunstonh

My challenge is finding how I might be able to encourage NPI -- or the current administrators of the pot, Pearl--- to increase and to unfreeze my pot. Have they done any thing illegal?

NPI would have to be invested in those areas to give those sort of returns and they havent been for most of the time. And no, they are doing nothing illegal.

You could have transferred out to another provider. That option still exists but as Ed says, there may be other guarantees in there which are valuable and worth keeping.

The Pearl Group is one of the weakest insurance companies in the UK and your investment returns do reflect that.