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    • bbuckle
    • By bbuckle 8th Nov 18, 12:40 AM
    • 79Posts
    • 27Thanks
    bbuckle
    When to engage an IFA
    • #1
    • 8th Nov 18, 12:40 AM
    When to engage an IFA 8th Nov 18 at 12:40 AM
    I am 59 years old (as is my partner). Like many people, I am completely baffled by pensions and the best way to handle them - something that has become obvious as I approach retirement age and think about this stuff more. Given that, I am not sure whether our circumstances would merit engaging an IFA and if it even would be worth their time (and mine) to do so.

    I am a member of a (now closed - in 2013) final salary scheme. When the Final Salary pension closed I had served 24 years. My latest 2018 statement suggests a (preserved pension) income of 15,200 a year. This is based on (I believe) a formula of averaging out the best 3 years salary in the past 10 years. My current salary is now around 50% higher than the 'Final Pensionable Salary' figure in the Statement.

    I also have a DC pot of around 57K and I also currently contribute to a SIPP that is sitting at around 20K (5% from me via salary sacrifice, and the same from my employer). I did a drawdown on my SIPP a few years ago, figuring that the reduced (to 10K) MPAA limit was perfectly acceptable. Subsequent legislation reducing that to 4K was very unwelcome news, however what is done is done.

    My partner has a 'frozen' pot of around 50K. I am assuming that this is a DC pot, but I don't really know for sure.

    On top of the above, we will both receive the state pension at the full rate as we both have enough 'full years'.

    My question is; given the above, is there anything we can do to optimise our pensions, and indeed is it even worth it to do so? Is it worthwhile engaging an IFA, or is our current position so mundane(?) that we should just leave it.

    Thank for your time.
Page 1
    • OldMusicGuy
    • By OldMusicGuy 8th Nov 18, 8:52 AM
    • 618 Posts
    • 1,301 Thanks
    OldMusicGuy
    • #2
    • 8th Nov 18, 8:52 AM
    • #2
    • 8th Nov 18, 8:52 AM
    You probably don't warrant using an IFA as you don't have a lot for them to advise on and it won't be cheap. Overall you seem to be in pretty good shape with a great DB pension for you and the full SP coming to you both.

    However, you may decide you want to consult an IFA. Before making that decision, there's three things you need to do:

    - Make a financial plan for your retirement. When will you retire, how much money will you need to finance your desired lifestyle, will you have enough assets left over to pay for care etc. You need to look at everything, expenditure, income, remaining debts if any, will you downsize etc. There is no point paying money to an IFA unless you have some clear financial goals and objectives. They cannot tell you what these will be.

    - Educate yourself about pensions. If you know more about pensions you will understand if it makes sense to employ an IFA, and you will understand more about the guidance they give you if you do use one. This is the book I recommend: DIY Pensions: A Simple Guide to Pensions, SIPPs & Retirement Planning, by John Edwards. There's plenty of info on the web on sites like this, also the Money Adice Service and Pensions Advisory Service websites.

    - Also, find out about your wife's pension and make sure you look into any other old pensions she may have. If she has a "pot" it will be some form of DC pension (DB pensions don't have "pots"). Include this in your financial planning.
    Last edited by OldMusicGuy; 08-11-2018 at 8:56 AM.
    • Audaxer
    • By Audaxer 8th Nov 18, 9:14 AM
    • 1,434 Posts
    • 875 Thanks
    Audaxer
    • #3
    • 8th Nov 18, 9:14 AM
    • #3
    • 8th Nov 18, 9:14 AM
    On top of the above, we will both receive the state pension at the full rate as we both have enough 'full years'.
    Originally posted by bbuckle
    Are you definitely sure that you will receive the maximum of 164 per week without further contributions? I have over 40 years full contributions but when I checked online I found out that while my maximum forecast was 164, I still need to make voluntary contributions for the next 6 years to get up to the maximum forecast.
    • Linton
    • By Linton 8th Nov 18, 9:15 AM
    • 9,967 Posts
    • 10,253 Thanks
    Linton
    • #4
    • 8th Nov 18, 9:15 AM
    • #4
    • 8th Nov 18, 9:15 AM
    I agree with Old Music Guy with a bit extra...

    Once you have your financial plan it may be obvious to you how to finance it from your various pension and savings pots with pessimistic assumptions. If so you may well decide there is no point in paying an IFA.

    On the other hand if you can’t see how to safely meet your objectives your choice is to reduce them or to pay for advice.
    • xylophone
    • By xylophone 8th Nov 18, 10:07 AM
    • 27,343 Posts
    • 16,357 Thanks
    xylophone
    • #5
    • 8th Nov 18, 10:07 AM
    • #5
    • 8th Nov 18, 10:07 AM
    You have both checked your state pension forecast?

    https://www.gov.uk/check-state-pension

    My partner has a 'frozen' pot of around 50K. I am assuming that this is a DC pot, but I don't really know for sure.
    Time for the partner to make sure........
    • LHW99
    • By LHW99 8th Nov 18, 10:44 AM
    • 1,526 Posts
    • 1,412 Thanks
    LHW99
    • #6
    • 8th Nov 18, 10:44 AM
    • #6
    • 8th Nov 18, 10:44 AM
    Your ability to put money in a pension may be reduced, but your partner can also make contributions if you give her/him the money to do so. The amount would be limited to their earnings after tax, or to 2880 if not earning, per year. Equalising pensions a bit can also be helpful if you pass away first.
    • Albermarle
    • By Albermarle 8th Nov 18, 10:45 AM
    • 202 Posts
    • 100 Thanks
    Albermarle
    • #7
    • 8th Nov 18, 10:45 AM
    • #7
    • 8th Nov 18, 10:45 AM
    My partner has a 'frozen' pot of around 50K. I am assuming that this is a DC pot, but I don't really know for sure
    .
    As said already if there is a pot of money it should normally be a DC ( or SIPP , it is the same thing really) scheme. Usually these are not 'frozen' but I guess you mean there have been no contributions to it recently. You should still get annual statements of the value , which normally will vary up and down , depending on exactly what funds it is invested in. Most DC pots have seen good growth in the last few years and if this one has not, you need to look into why.
    Also normally you can still make contributions to older pensions if you want but best to check first with the pension company involved.
    • bbuckle
    • By bbuckle 8th Nov 18, 10:47 AM
    • 79 Posts
    • 27 Thanks
    bbuckle
    • #8
    • 8th Nov 18, 10:47 AM
    • #8
    • 8th Nov 18, 10:47 AM
    Sorry, that should have read 'as we will both have enough full years'. I have around 3 1/2 years of contributions to get to 164 per week.
    • bbuckle
    • By bbuckle 8th Nov 18, 10:52 AM
    • 79 Posts
    • 27 Thanks
    bbuckle
    • #9
    • 8th Nov 18, 10:52 AM
    • #9
    • 8th Nov 18, 10:52 AM
    All good replies, and OldMusicGuy, yours should be a sticky.

    I will definitely be taking more of an interest in this as it will be my major source of income in a few years! I will get the book, check the forecast, and start a financial plan.

    Thanks again all, much appreciated.

    EDIT: It turns out that the book suggested by OldMusicGuy is on sale at almost 50% off on Amazon (Kindle version) - result!
    Last edited by bbuckle; 08-11-2018 at 11:06 AM. Reason: Added info
    • kidmugsy
    • By kidmugsy 8th Nov 18, 12:20 PM
    • 12,076 Posts
    • 8,524 Thanks
    kidmugsy
    (1) Establish what % of your DB pension will be paid to your widow. Establish what the CETV of that pension is, and then (in all probability) decide not to transfer unless you have a compelling need for a large TFLS (tax-free lump sum) or objective reason to expect a short life for both of you. Check the size of the TFLS that comes with the DB pension, if any, and the commutation rate that would allow you to give up some annual pension in return for (more) TFLS. Check also the reverse commutation rate. Check the Actuarial Reduction Rate if you wanted to take the DB pension early.

    (2) The 4k p.a. restriction limits what you can do by way of building up money purchase pensions but it doesn't restrict your wife. Since you are both past 55 already, money in a pension is available if required pretty much on demand - in practice on perhaps about a month's notice. Therefore consider seriously pension contributions for your wife. Even if she has no earnings she can contribute 2,880 net = 3,600 gross per tax year.

    (3) There's lots to be said for the recommendations you got from OMG.
    Free the dunston one next time too.
    • bbuckle
    • By bbuckle 9th Nov 18, 11:16 PM
    • 79 Posts
    • 27 Thanks
    bbuckle
    Sorry, that should have read 'as we will both have enough full years'. I have around 3 1/2 years of contributions to get to 164 per week.
    Originally posted by bbuckle
    Oddly, checking this today shows that the required number of years still to go has reduced to 2, which will bring me up to age 61. Checking this last month definitely showed more than 3 years - unless I am seriously losing the plot!

    Currently I have 43 years of full contributions.
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