Pension fund withdrawal.
Discussion
I'm after a fairly simple answer if poss! My IFA is trying to baffle me!
I'm 57 and I want to withdraw 25% of my personal pension fund that is with Scottish Widows.
If I withdraw the lump sum now, do I immediately have to purchase an annuity or can I leave the other 75% of my fund with Scottish Widows until such time as I want to buy the annuity, i.e. when I retire.
My IFA is pushing me into switching the balance into another pension provider & buy the annuity now.
Is this correct?
I'm 57 and I want to withdraw 25% of my personal pension fund that is with Scottish Widows.
If I withdraw the lump sum now, do I immediately have to purchase an annuity or can I leave the other 75% of my fund with Scottish Widows until such time as I want to buy the annuity, i.e. when I retire.
My IFA is pushing me into switching the balance into another pension provider & buy the annuity now.
Is this correct?
Thanks for that! My alarm bells rang when I spotted in small print the amount of commission he was going to get from the new provider.
Thank you also for the info about the qualifications - I may make discreet inquiries! Will certainly PM you if I may if he tries to baffle me further. I suppose I could always ditch him!
Cheers!
Thank you also for the info about the qualifications - I may make discreet inquiries! Will certainly PM you if I may if he tries to baffle me further. I suppose I could always ditch him!
Cheers!
musclecarmad said:
9.3 said:
I'm after a fairly simple answer if poss! My IFA is trying to baffle me!
I'm 57 and I want to withdraw 25% of my personal pension fund that is with Scottish Widows.
If I withdraw the lump sum now, do I immediately have to purchase an annuity or can I leave the other 75% of my fund with Scottish Widows until such time as I want to buy the annuity, i.e. when I retire.
My IFA is pushing me into switching the balance into another pension provider & buy the annuity now.
Is this correct?
no you can just take the cash mate - ask your IFA if he has J04 J05 and AF3 qualifications. (which i do I'm 57 and I want to withdraw 25% of my personal pension fund that is with Scottish Widows.
If I withdraw the lump sum now, do I immediately have to purchase an annuity or can I leave the other 75% of my fund with Scottish Widows until such time as I want to buy the annuity, i.e. when I retire.
My IFA is pushing me into switching the balance into another pension provider & buy the annuity now.
Is this correct?
) they are the more advanced pension qualifications.he seems like he is after commission on the annuity
pm me if you wish.
ps if you have a fund over about 100k then an annuity may be terrible advice.
Edited by musclecarmad on Tuesday 5th October 10:27
I looked at taking 25% cash out of an equity based defined contribution fund (six figure)to take advantage before the new age limits brought in this year, I was 50 in dec 2009, I went through it with an IFA, associated with the accountants I use, though he assured me he was independent .
His advice was that if I took the 25% cash I would have to move the remaining 75% of the fund into another investment, it couldn`t stay in the existing fund. As the existing fund ( ex company ) incurs only 0.5% management fees I would have to move it into another fund with fees of between 2.5 - 5.0%, his advice was that if I didn`t need the money now better to keep it where it is and keep taking advantage of the 0.5% fees.
I am a Chartered Insurance Practitioner and IFA with all the appropriate pension qualifications and have been advising on pensions for 25 years.
Retirement planning is a highly complex area and the options are now even more diverse following the rule changes from April 2006 (Finance Act 2004).
Pension drawdown is ideally suited to funds of £200k plus, but there are signifcant risks of investment, mortality drag and charges!
Fixed term annuities are new to the market and offer a good compromise between drawdown and annuities, whilst keeping options open if circumstances change. Enhanced annuities also need to be explored.
It is impossible to give guidance over a forum without a full understanding of circumstances, health, objectives, income needs and attitude to risk, amongst others! It is wrong to discount annuities with one foul swoop. Pension drawdown is often favoured by certain IFAs for the wrong reasons, in particular ongoing fees and charges!
PM me if you want to chat further
Retirement planning is a highly complex area and the options are now even more diverse following the rule changes from April 2006 (Finance Act 2004).
Pension drawdown is ideally suited to funds of £200k plus, but there are signifcant risks of investment, mortality drag and charges!
Fixed term annuities are new to the market and offer a good compromise between drawdown and annuities, whilst keeping options open if circumstances change. Enhanced annuities also need to be explored.
It is impossible to give guidance over a forum without a full understanding of circumstances, health, objectives, income needs and attitude to risk, amongst others! It is wrong to discount annuities with one foul swoop. Pension drawdown is often favoured by certain IFAs for the wrong reasons, in particular ongoing fees and charges!
PM me if you want to chat further
Hi - I'm a Yorkshireman too!
You raise quite correctly the key objections to annuities, which will always be there. However, you can now have a fixed term annuity with a full return of fund on death, and also take 120% maximum GAD income if you want to draw down your fund as quickly as possible, with a guaranteed fund value at the end of the term. These are the same rules as pension drawdown, but without all the risks.
Pension drawdown is great where you want to keep control of your capital and wish to invest in the markets, with the hope that your fund will grow and/or annuity rates improve in the future, thus you benefit from a potentially increasing income. It should get a boost when the age 75 rule is abolished in April 2011.
Lifetime conventional annuities are best for impaired lives; we have set up large annuities this year with yields as high as 10% pa (long surviving heart transplant patient). Typically, a client who is overweight and suffers from hypertension and high cholestrol, should secure a rate guaranteed for life of circa 7% pa.
Annuities are a mortality gamble with an insurance company, you either win or lose!
Eveyone's circumstances differ; that's why giving financial advice (and not just selling a product like the banks) is challenging and fun!
You raise quite correctly the key objections to annuities, which will always be there. However, you can now have a fixed term annuity with a full return of fund on death, and also take 120% maximum GAD income if you want to draw down your fund as quickly as possible, with a guaranteed fund value at the end of the term. These are the same rules as pension drawdown, but without all the risks.
Pension drawdown is great where you want to keep control of your capital and wish to invest in the markets, with the hope that your fund will grow and/or annuity rates improve in the future, thus you benefit from a potentially increasing income. It should get a boost when the age 75 rule is abolished in April 2011.
Lifetime conventional annuities are best for impaired lives; we have set up large annuities this year with yields as high as 10% pa (long surviving heart transplant patient). Typically, a client who is overweight and suffers from hypertension and high cholestrol, should secure a rate guaranteed for life of circa 7% pa.
Annuities are a mortality gamble with an insurance company, you either win or lose!
Eveyone's circumstances differ; that's why giving financial advice (and not just selling a product like the banks) is challenging and fun!
musclecarmad said:
sounds like you know what you are talking about the meister.
however, i'm from yorkshire so am quite blunt and to the point. I reckon if you have over 100k in a pension in the majority of circumstances annuities are s
t.
1. they die on your death subject to some poor guarantees.
2. if you get say 6k per year per 100k you have and retire at say age 65 you have to live for about 17 years till you even get your initial money back so that means living till about 78 before you even get your initial pot back and that doesn't even include the lost interest on your cash. Yes, you can live longer but mortality cross subsidy is the biggest load of bks i've ever heard
There was another thread discussing annuities which provided similar thoughts about annuities.however, i'm from yorkshire so am quite blunt and to the point. I reckon if you have over 100k in a pension in the majority of circumstances annuities are s
t.1. they die on your death subject to some poor guarantees.
2. if you get say 6k per year per 100k you have and retire at say age 65 you have to live for about 17 years till you even get your initial money back so that means living till about 78 before you even get your initial pot back and that doesn't even include the lost interest on your cash. Yes, you can live longer but mortality cross subsidy is the biggest load of b
ks i've ever heard Current life expectation for a 65 year old male is around 17.5 years and clearly that is only going one way, which is reflected in annuity pricing.
The best single life, non increasing, annuity rates are around 7%.
You can also choose annuities that have a guarantee period and or include a spouse's pension etc
I readily admit that annuities aren't for everyone, for various reasons, and are very inflexible.
Other solutions (drawdown etc) require the policyholder to take investment and longevity risk, something that may or may not turn out to be profitable. Additionally, drawdown offers the ability to 'time the market' and potentially defer the purchase of an annuity until rates improve.
To my mind, the fact that if you die sooner than expected the annuity is poor value is no better or worse than the fact that if you survive longer than expected your money might run out with a drawdown product! To provide a guaranteed amount of money while someone remains alive annuities are the best (and only) thing available.
Re your comment about mortality cross subsidy b
ks, what exactly is the issue here?Are you saying that insurance companies are incorpoarting huge profit margins in these products?
:
Sidicks
musclecarmad said:
Therefore if ret at 65 you need to live past 85 to even start benefitting. Chances are too slim for that to happen.
Probability of a male pensioner age 65 living until 85 is almost 45%Probability of a male pensioner age 65 living until 90 is almost 21%
Probability of a male pensioner age 65 living until 95 is almost 6.5%
45% doesn't really seem like a 'slim chance' to me
Note that this also implies that:
Probability of an 85 year old living until age 90 is almost 50%
Probability of an 85 year old living until age 95 is almost 15%
Therefore I'm not sure that this 'mortality cross subsidy' is actually b
ks.Having said that, I wouldn't necessarily disagree that now isn't the best time to buy an a annuity....!
Sidicks
Edited by sidicks on Friday 8th October 15:25
Not a Yorkshireman, I'm a softie southerner, but I must have some of the blood in me somewhere. Have I read this right, 2.5-5% pa to advise/manage your pot of money for you. The upper end is almost as much as the return to the 'money owner', how can that be right. So without the blood suckers involved the return might be a lot more, nearer 10% rather than the 5%+ being offered, how does one go about that.
HarryW said:
Not a Yorkshireman, I'm a softie southerner, but I must have some of the blood in me somewhere. Have I read this right, 2.5-5% pa to advise/manage your pot of money for you. The upper end is almost as much as the return to the 'money owner', how can that be right. So without the blood suckers involved the return might be a lot more, nearer 10% rather than the 5%+ being offered, how does one go about that.
Depending on the strategy, 1% p.a. in charges is ok, 2% is high!!Sidicks
sidicks said:
HarryW said:
Not a Yorkshireman, I'm a softie southerner, but I must have some of the blood in me somewhere. Have I read this right, 2.5-5% pa to advise/manage your pot of money for you. The upper end is almost as much as the return to the 'money owner', how can that be right. So without the blood suckers involved the return might be a lot more, nearer 10% rather than the 5%+ being offered, how does one go about that.
Depending on the strategy, 1% p.a. in charges is ok, 2% is high!!Sidicks
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