Income drawdown vs annuity purchase at retirement

jem16

Pimperne1 wrote: »

So, can you take a lump sum and invest it elsewhere? If you can then my question remains - why not take £170k out of your mortgage and buy a property to rent out?

Assuming you mean take £170k out of your pension and not mortgage, you can only do this if you are age 55 or over and your total pension pot is £850k or more as you can only take a maximum of 25%.

srcandas

Great thread so thanks to one and all.

Just wondered if someone could shout if I have this wrong:

I have a pru with profits that contains 66k plus any end bonus (haven't a clue what that might be). It is potentially up end of August. So can I take this, convert it to a draw down, but not necessarily take anything for some years leaving it to grow (hopefully )?

And in parallel consolidate my other pensions (100k) and continue paying into them? (I'll be 60 in August and have a variable income).

My thinking is that the pru does less well than my Scottish Equitable for example and the unknown element (the bonus) would at least be resolved. And as bonuses seem to go down these days and costs go up I'd be happy about that.

I'm waiting on a chat to an IFA but would like to get this option, among others, clear in my head.

Added later ................... BUT BUT BUT I need £20k of other pension??? So to answer my own question I can't unless the rules change on Wednesday or until I take the other pension and state pension to the £20k level. O b*m

So looks like I have no option but to extend the pru.
:beer:

smiler2

Remember also, once you start drawdown you cannot add to any pension any more and get 20% or more tax uplift. Also state pension counts towards £20k.

Paul_Herring

smiler2 wrote: »

Remember also, once you start drawdown you cannot add to any pension any more and get 20% or more tax uplift. .

Really? When was that changed?

atush

smiler2 wrote: »

Remember also, once you start drawdown you cannot add to any pension any more and get 20% or more tax uplift. Also state pension counts towards £20k.

I agree with Paul, AFAIK, that is wrong and you can continue to pay into pensions. I think you can't pay into a PS one once you have taken retirement benefits?

smiler2

I just read this, under Q&A here form tpas site
http://www.pensionsadvisoryservice.org.uk/annuities-and-income-drawdown/flexible-drawdown
What are the conditions for meeting the flexible drawdown rules?

In addition to meeting the requirement to have a secured pension income of £20,000, the conditions you have to meet are as follows:

• You make a valid declaration to the pension provider that you meet the flexible drawdown rules; and
• No further contributions are made by you or on behalf of you to a defined contribution scheme; and/or
• You are not building up further benefits in a defined benefit (or cash balance) scheme.

In effect, any new pension savings made after flexible drawdown is taken will be liable to the annual allowance charge (i.e. income tax at your marginal rate of tax).

Paul_Herring

smiler2 wrote: »

I just read this, under Q&A here form tpas site

That appears to be for people using flexible drawdown only. Not drawdown in general.

You can start drawdown from your fund without meeting the flexible drawdown conditions, thus still be able to contribute (though I'm sure there are some rules preventing direct recycling of the 25% back into the fund...)

dunstonh

FOS has published complaints stats today. IFA and investment complaints continued to fall but pensions increased. Drawdown complaints are a key reason for the increase.

Pensions complaints have jumped 28 per cent from 2,706 to 3,454. Disputes about pensions often involved those in or close to retirement. The FOS says it is continuing to see complaints where consumers have taken out alternative pension arrangements to combat low annuity rates, but ended up taking on higher investment risk as a result.

jamesd

dunstonh wrote: »

FOS has published complaints stats today. IFA and investment complaints continued to fall but pensions increased. Drawdown complaints are a key reason for the increase.

It'd be more accurate to describe the income drawdown complaints that are just 2.7% of the pension case load as of minimal significance than a key factor. The real pension complaint numbers* are:

personal pensions from 1,407 to 1,827
SIPP and SSAS from 472 to 562
annuities from 423 to 511
SERPS from 196 to 294
income drawdown from 66 to 94
FSAVC from 65 to 76

An increase of over 400 in personal pension complaints is of hugely greater significance than an increase of just 28 claims about income drawdown.

*from page 43 of the FOS annual review 2012

dunstonh

That copy and paste statement was made by the FOS.

The product list stating income drawdown would be income drawdown plans. Personal pensions can also do drawdown as can SIPPs.