Aged between 50 and 55?
Discussion
musclecarmad said:
If it was my money i'd want as much money in cash in my account rather than in a pension whereby the govt can fiddle you but obviously thats just me and not formal financial advice!
Can you expand on that statement...if you are in a company pension scheme (I am in final salary) and the Trustees of the Pension fund advise that your pension will be £x per annum how can the government fiddle you. Surely any changes the government can do relate to the income generated by the fund itself.Edited by musclecarmad on Tuesday 29th December 19:04
If you take cash out you still have to reinvest it to produce an income and then you run the risk of fund managers not performing or at least taking their cut/commission before any returns are seen
I was aware of the rules changing, but have been spurred into action with the idea put by the Daily Mail that the government might remove the 25% tax free lump sum option. I have 14 years contributions in a final salary scheme that I stopped contributing to in 1994, I have sent a letter to the secretary of the staff pension fund stating that I was considering taking my 25% tax free lump sum out before the law changed in 2010...and asking what I would receive. I am 50 and was made redundant 2 weeks ago.
I have 3 small 'stakeholder' type company pensions with different pension providers over a similar time scale. I had 2 with my first Company (Unwins insolvent Dec 2005) and 1 with my next company ( Threshers insolvent Dec 2009.) I thought I would wait and see what my pot was with the final salary scheme one first, before I contacted the others. It may be that I have to amalgamate the three into one pot first before I can draw down the money.
I have 3 small 'stakeholder' type company pensions with different pension providers over a similar time scale. I had 2 with my first Company (Unwins insolvent Dec 2005) and 1 with my next company ( Threshers insolvent Dec 2009.) I thought I would wait and see what my pot was with the final salary scheme one first, before I contacted the others. It may be that I have to amalgamate the three into one pot first before I can draw down the money.
Forgive me if I'm being a bit obtuse...but 25% of an allocated 'final salary' fund will only change with annual inflationary measures, and will ( in effect) tread water with low inflation/interest rates.
Better to take the sum out now and put it into a cash Isa and following year Isa as well ( if there's enough) - so it's there if needed.
Better a bird in the hand than two in the bush
Better to take the sum out now and put it into a cash Isa and following year Isa as well ( if there's enough) - so it's there if needed.
Better a bird in the hand than two in the bush
condor said:
Forgive me if I'm being a bit obtuse...but 25% of an allocated 'final salary' fund will only change with annual inflationary measures, and will ( in effect) tread water with low inflation/interest rates.
Better to take the sum out now and put it into a cash Isa and following year Isa as well ( if there's enough) - so it's there if needed.
Better a bird in the hand than two in the bush
Doesn't quite work like that. The pension scheme will have a 'commutation rate' - this is a factor used to calculate the amount of pension you have to give up in exchange for a lump sum. If for example, there is a commutation factor of 12:1 then £12,000 lump sum would cost you £1,000 of your pension. Based on taking this pension at age 65, this would mean that living beyond around age 76/77 (with inflationary pension increases) would make taking the pension the better option.Better to take the sum out now and put it into a cash Isa and following year Isa as well ( if there's enough) - so it's there if needed.
Better a bird in the hand than two in the bush
Obviously this is assuming you live that long but you need to consider that taking the lump sum between 50 and 55 will mean the scheme will apply a reduction to this calculation which will likely mean that you are giving up a huge amount of future pension relative to the level of lump sum obtained. Well worth seeking some professional advice before you commit to anything.
musclecarmad said:
if they remove the 25% tax free cash lump sum then there is really no need for private pensions anymore as an ISA will do a similar thing but better imho.
The main reason I can think of is getting 40% tax back. Even getting 20% back if not a higher rate payer has got to be worth it.Secondly only so much can be put into an ISA each year even though the allowances have been increased substantially. Granted only so much can be put into a pension but as the limit is 100% of what you earn it doesn't seem to tie one down that much.
Soft Top said:
The main reason I can think of is getting 40% tax back. Even getting 20% back if not a higher rate payer has got to be worth it.
Secondly only so much can be put into an ISA each year even though the allowances have been increased substantially. Granted only so much can be put into a pension but as the limit is 100% of what you earn it doesn't seem to tie one down that much.
If you are a basic rate taxpayer (as most people are) then yes you will receive 20% relief on contributions, however you will then be taxed at at least 20% on the income you receive when you draw the pension. In an ISA you will be able to draw an income free of tax altogether and also avoid the heavy restrictions on how & when you take this income.Secondly only so much can be put into an ISA each year even though the allowances have been increased substantially. Granted only so much can be put into a pension but as the limit is 100% of what you earn it doesn't seem to tie one down that much.
Also, although the contributions limits for ISAs are far lower than those for pensions, how many people do you think are in a position to contribute £7,000 or so towards their retirement, let alone their entire earnings.
Jespin said:
Doesn't quite work like that. The pension scheme will have a 'commutation rate' - this is a factor used to calculate the amount of pension you have to give up in exchange for a lump sum. If for example, there is a commutation factor of 12:1 then £12,000 lump sum would cost you £1,000 of your pension. Based on taking this pension at age 65, this would mean that living beyond around age 76/77 (with inflationary pension increases) would make taking the pension the better option.
Obviously this is assuming you live that long but you need to consider that taking the lump sum between 50 and 55 will mean the scheme will apply a reduction to this calculation which will likely mean that you are giving up a huge amount of future pension relative to the level of lump sum obtained. Well worth seeking some professional advice before you commit to anything.
But at 65 one then gets the state pension which would even out any loss from taking the private pension at an earlier age. My situation is that I'm now unemployed and after I've received 6 months contributions based JSA then I'll have no income other than to draw down my savings. I own my house outright so don't really need much to live on. In effect, I will have retired at age 51 so if it's possible to claim a pension then and it's worthwhile to, then I will. I don't envisage living beyond 70 although it's a possibility Obviously this is assuming you live that long but you need to consider that taking the lump sum between 50 and 55 will mean the scheme will apply a reduction to this calculation which will likely mean that you are giving up a huge amount of future pension relative to the level of lump sum obtained. Well worth seeking some professional advice before you commit to anything.
Edited by condor on Thursday 31st December 10:20
I'll wait and see what my pension forecast is before deciding. I'm fairly certain the pension dies with me as I have no dependants. My estate will go to my brother and his children. A fortnight ago I was diagnosed with skin cancer that although most likely curable, does focus the mind somewhat. My father suggested that I take the money out now, as family history of skin cancer deaths is high.
I don't need the lump sum, as 3 different endowment policies that were intended to pay off the house will pay out steadily over the next few years. However, I don't want to die without anything being taken from the pot.
I don't need the lump sum, as 3 different endowment policies that were intended to pay off the house will pay out steadily over the next few years. However, I don't want to die without anything being taken from the pot.
I don't have critical illness cover, or even redundacy cover...as there's nothing to cover. I own all my possessions outright - I have insurances to cover house, contents and car and as far as I'm aware, that's all I need as a fail-safe mechanism. No debt, and plenty of savings ( though I have worked hard for them).
It is the dying early bit and missing out on all those 30 odd years contributions that make me want to cash in now. Not because I need them, but otherwise they'll just disappear into thin air.
It is the dying early bit and missing out on all those 30 odd years contributions that make me want to cash in now. Not because I need them, but otherwise they'll just disappear into thin air.
Just an update here - received letter from pension fund secretary in which it says:-
'The earliest you can receive your deferred pension without applying to the Trustees will be when you reach 60 years of age. To be able to receive your pension before you reach 60 years of age you would have to formally apply to the Trustees and you must have retired from any form of employment.'
I can't quite see how I need to have retired from any form of employment - any suggestions?
Another bit :-
'With regard to taking your tax free lump sum you are not able to take the lump sum unless you are electing to receive your pension...It is when you take the pension that you can opt to take the lump sum and a reduced pension instead of a full pension.'
So it would appear that I have to wait another 10 years to take my final salary type pension - Hmmm, I suppose the next step will be to try and release the money from the stakeholder type schemes.
It's not quite as easy as I thought it was going to be.
'The earliest you can receive your deferred pension without applying to the Trustees will be when you reach 60 years of age. To be able to receive your pension before you reach 60 years of age you would have to formally apply to the Trustees and you must have retired from any form of employment.'
I can't quite see how I need to have retired from any form of employment - any suggestions?
Another bit :-
'With regard to taking your tax free lump sum you are not able to take the lump sum unless you are electing to receive your pension...It is when you take the pension that you can opt to take the lump sum and a reduced pension instead of a full pension.'
So it would appear that I have to wait another 10 years to take my final salary type pension - Hmmm, I suppose the next step will be to try and release the money from the stakeholder type schemes.
It's not quite as easy as I thought it was going to be.
Havent read all the above so soz if i'm off track...but if you die with a SH/personal pension still invested as a pension fund it doesnt "disappear" - the fund goes to someone (whoever you nominate, normally) ...if you take the fund as an income (and cash) then yes...a large amount of the money will become useless on your death.
Yet another update
Today I received the forecasts for my final salary penion - Doesn't mention me taking the 25% off. It was a lot more than I was expecting.
If I take the pension within the next couple of months it will be just over £3K a year, leave it till 55 and I'll get just over £4.5K ...if I leave it till 60 then it's £7.5 K a year. Hmmmm, obviously it is far more advantageous to wait till I'm 60 ( tis only 10 years away).
I think I need a more realistic life-time monitor so I can weigh up the odds.
Today I received the forecasts for my final salary penion - Doesn't mention me taking the 25% off. It was a lot more than I was expecting.
If I take the pension within the next couple of months it will be just over £3K a year, leave it till 55 and I'll get just over £4.5K ...if I leave it till 60 then it's £7.5 K a year. Hmmmm, obviously it is far more advantageous to wait till I'm 60 ( tis only 10 years away).
I think I need a more realistic life-time monitor so I can weigh up the odds.
condor said:
If I take the pension within the next couple of months it will be just over £3K a year, leave it till 55 and I'll get just over £4.5K ...if I leave it till 60 then it's £7.5 K a year. Hmmmm, obviously it is far more advantageous to wait till I'm 60 ( tis only 10 years away).
I think I need a more realistic life-time monitor so I can weigh up the odds.
In simplistic terms, assuming you live to 68 you should wait. But the other factors are: inflation, and potential investment gains if you take it now.I think I need a more realistic life-time monitor so I can weigh up the odds.
Thanks, there is another small query I have.
There's amounts for pre 1988 GMP and post 1988 GMP at date of leaving. Can someone explain what the acronymn means?
Also there was another amount for excess at date of leaving, which I don't understand either. I thought I'd ring them next week and ask them to clarify things,( especially the bit about not being able to be employed elsewhere) but would be useful if I had a vague idea of what I was talking about.
There's amounts for pre 1988 GMP and post 1988 GMP at date of leaving. Can someone explain what the acronymn means?
Also there was another amount for excess at date of leaving, which I don't understand either. I thought I'd ring them next week and ask them to clarify things,( especially the bit about not being able to be employed elsewhere) but would be useful if I had a vague idea of what I was talking about.
Gassing Station | Finance | Top of Page | What's New | My Stuff