Serps - help
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catowner123
Posts: 20 Forumite
Hi
My father has recently worked out he has £68k in a SERPS pension fund which he is entitled to - he is 60 now.
He has been told he can take 25% tax free and then approx £2.5k ish a year.
However he said to me that people have been suggesting this is not the right time to cash out SERPS but he isnt sure why. Any ideas on what people might be talking about? Are they simply suggesting the market is low (where the cash is invested by Aviva) so to hold out? Or is there something else I'm missing?
Thanks!
My father has recently worked out he has £68k in a SERPS pension fund which he is entitled to - he is 60 now.
He has been told he can take 25% tax free and then approx £2.5k ish a year.
However he said to me that people have been suggesting this is not the right time to cash out SERPS but he isnt sure why. Any ideas on what people might be talking about? Are they simply suggesting the market is low (where the cash is invested by Aviva) so to hold out? Or is there something else I'm missing?
Thanks!
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Comments
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When you say he has 'worked out', what exactly do you mean (or what does he mean)? Who are 'the people' who have been suggesting?
Sounds as if he opted out of SERPS and took out a private pension - anything on the paperwork to suggest that's the case? if so, his decision has nothing to do with SERPS any more, but is simply a pension which he can take now or in the future; and (depending on the terms of the pension), 25% as a tax free lump sum and the rest as pension (£2.5K a year sounds about right); or take the lot as cash, with tax payable on 75% of it.
Perhaps get an up to date quote from Aviva before going any further.0 -
Yes thats correct he opted out and took a private pension.
He heard from his friends or other people he used to work with but didnt really understand why they were saying that. I wanted to check if I was missing something but it seems there are really 3 options:
1. Cashing out now at the £68k current value (25% lump sum and remaining annuallly)
2. Cashing the lot out now at a high tax rate - defo not!
3. Leaving this pot in the fund and simply see where the value goes in the future (up and down). I presume down/static for a while given the unknown of brexit etc...0 -
If Aviva have purely invested in the UK then yes, Brexit may cause a down/static looking chart. However, if the funds are diversified in markets around the world then Brexit won't have too much of a negative effect. On the contrary, when the £ falls it makes investemets in other currencies worth more in £ terms.catowner123 wrote: »3. Leaving this pot in the fund and simply see where the value goes in the future (up and down). I presume down/static for a while given the unknown of brexit etc...0 -
catowner123 wrote: »Y
He heard from his friends or other people he used to work with but didnt really understand why they were saying that.
Probably they don't understand either - and it always comes down to being a personal decision based on your own circumstances.0 -
The market has dipped slightly in recent weeks.
"His friends or other people" might be assuming it will return to its recent high point in due course.
It might do. It might go even higher. It might not recover in good time. It might slide further.
Does he actually need any part of this money now?. If he's not yet retired, or financially stable, then what's the rush?
I wouldn't worry about Brexit. The uncertainty was priced into the market two years ago.0 -
He would prefer to have it now as he wants to collate his cash together and buy a property to rent out.
Thanks for all the help0 -
Yet another amateur landlord who hasn't done the sums but thinks letting out property is the road to riches.0
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hahahahahaha you're so funny Joe. Wish I was more like you.....idiot.0
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AnotherJoe wrote: »Yet another amateur landlord who hasn't done the sums but thinks letting out property is the road to riches.
How do you know he hasn't?0 -
How do you know he hasn't?
Because he calls it a "SERPS pension", because he's asked some mates down the pub who've said "dont cash it in" but neither he nor they seem to be clear as to why or indeed have any clue what it consists of, what the investments are, what the might do, whether they are well invested (and indeed if the growth on it might outmatch what he's planning to get a return on with a rental property !)
So, I've made the logical deduction his research into being a landlord is as sloppy as his attitude towards sixty eight thousand pounds he's only just worked out he has but knows nothing else about.
So, C123, can you post a brief summary of the sums your dad has done to show how much profit he'll make. Just the basics;
Agent fees.
Legal costs
Stamp duty (extra 3%?)
Mortgage payments
Mortgage interest.
Maintenance allowance.
Void period allowance.
Insurance
Gas & electric certificates
Cleaning & redecoration fees
Deposit protection scheme
ERC certificate
Utlities if applicable
Tax on profits
CGT when selling
Rental income
Thats just as they occur to me, no doubt there are others.
Then contrast that with the returns on his "SERPS pension"
Surely he wouldn't launch into beinag landlord without understanding that? The person who did that would be,well, an idiot.0
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