Small pension pot, trying to take lump sum
Discussion
Aged 67. I have 2 defined benefit pensions, now in payment, plus the state pension. Combined, these are paying around £24k a year gross. I'm also still working (sole trader). Slowing down a bit now, so profit is around £10k.
I also have a DC pension pot from a part time job, pot is around £9.8k.
If I convert this to an annuity, it would pay next to nothing.
I figured that I'd take the tax free lump sum, then leave the rest until I actually need it. If I took the whole sum now, I might slip into the 40% tax band.
I phoned the scheme administrator, explained what I wanted to do, and they sent me a load of forms. I filled them in and posted back, but apparently I ticked some wrong boxes - quotation showed the lump sum as taxable.
I phoned again, explained again what I wanted to do, and waited for another form to arrive.
Now got an email saying something else is wrong - something about not saying where I wanted the flexi-access drawdown remainder to be invested?
Why are L&G making this so difficult to understand? With such a small pot, paying an IFA really wouldn't make sense.
When I took my DB pensions, it was dead simple - phone call to Mercer, sign a form, get paid monthly.
I also have a DC pension pot from a part time job, pot is around £9.8k.
If I convert this to an annuity, it would pay next to nothing.
I figured that I'd take the tax free lump sum, then leave the rest until I actually need it. If I took the whole sum now, I might slip into the 40% tax band.
I phoned the scheme administrator, explained what I wanted to do, and they sent me a load of forms. I filled them in and posted back, but apparently I ticked some wrong boxes - quotation showed the lump sum as taxable.
I phoned again, explained again what I wanted to do, and waited for another form to arrive.
Now got an email saying something else is wrong - something about not saying where I wanted the flexi-access drawdown remainder to be invested?
Why are L&G making this so difficult to understand? With such a small pot, paying an IFA really wouldn't make sense.
When I took my DB pensions, it was dead simple - phone call to Mercer, sign a form, get paid monthly.
Another phone call just now.
I have to tell them which "investment pathway" I want to use for the remainder of the pot.
Apparently "whichever fund is actually going to keep up with inflation the best" isn't an option....
The current fund has been dropping by £50 to £100 a year since I left the job 6 years ago.
I'm no financial wizard, but I'm not stupid. Certainly smarter and more savvy than most of my ex-colleagues. Most of them had no idea that paying into a pension meant getting "free money" (contributions) from the employer.
If I can't figure it out, how is someone who left school with a couple of GCSEs going to make sense if it?
The whole system seems to be geared to making money for the pension companies, and bamboozling the employees.
I have to tell them which "investment pathway" I want to use for the remainder of the pot.
Apparently "whichever fund is actually going to keep up with inflation the best" isn't an option....
The current fund has been dropping by £50 to £100 a year since I left the job 6 years ago.
I'm no financial wizard, but I'm not stupid. Certainly smarter and more savvy than most of my ex-colleagues. Most of them had no idea that paying into a pension meant getting "free money" (contributions) from the employer.
If I can't figure it out, how is someone who left school with a couple of GCSEs going to make sense if it?
The whole system seems to be geared to making money for the pension companies, and bamboozling the employees.
Seems like easy confusion. Asking for a lump sum usually means you want it all now. You seem to be at the right place with flexi access and the 25% tax free up front.
Now they want to know what to do with the other 75% - I guess you could just tell them to leave it where it is now ? Otherwise have a look at the 'investment pathways' and just pick one.
Now they want to know what to do with the other 75% - I guess you could just tell them to leave it where it is now ? Otherwise have a look at the 'investment pathways' and just pick one.
Yes you would think that asking for £2,500 as the tfc leaving a relatively modest £7.5k “ crystallised “ as such would hardly involve more than one form and the bank account number.
I guess the problem is compliance and L&G being terrified that somehow in later years without lots of form filling and hoops you might come back at them.
I guess the problem is compliance and L&G being terrified that somehow in later years without lots of form filling and hoops you might come back at them.
Yes, the remaining 75% is now the sticking point.
If it was possible to just put it in a cash fund that moved it around to whichever bank was paying decent interest, and then get taxed as income on future withdrawals, that would probably be the best option.
Should be possible to have this automated, so minimal management fees, and the chance of at least not losing money every year.
There must be loads of people with tiny DC pots from minimum wage part time employment?
I paid in the maximum amount that the employer would "match" for nearly 10 years, but I was only working 16 hours a week, so the pot is small.
Last time I checked, the annuity rate was something like 3%, so a pension of £25 a month.
In contrast with my 2 DB schemes, DC is a bit rubbish for the average or below average worker. Probably makes more sense for higher rate tax payers?
If it was possible to just put it in a cash fund that moved it around to whichever bank was paying decent interest, and then get taxed as income on future withdrawals, that would probably be the best option.
Should be possible to have this automated, so minimal management fees, and the chance of at least not losing money every year.
There must be loads of people with tiny DC pots from minimum wage part time employment?
I paid in the maximum amount that the employer would "match" for nearly 10 years, but I was only working 16 hours a week, so the pot is small.
Last time I checked, the annuity rate was something like 3%, so a pension of £25 a month.
In contrast with my 2 DB schemes, DC is a bit rubbish for the average or below average worker. Probably makes more sense for higher rate tax payers?
The numbers you’ve given don’t suggest that taking the whole lot will push you over £50k and into the 40% tax bracket (£24k + £10k + £9.8k = £43.8k - and not all of that is taxable?).
If you still don’t wish to take the whole lot, I’d suggest investing the crystallised remainder in 100% equities in a low cost global tracker fund. If it’s been losing value over the last 6 years it sounds like it’s been invested in non-equity stuff and given that it is a small part of your overall pension situation, you could afford to be exposed to a little risk.
If you still don’t wish to take the whole lot, I’d suggest investing the crystallised remainder in 100% equities in a low cost global tracker fund. If it’s been losing value over the last 6 years it sounds like it’s been invested in non-equity stuff and given that it is a small part of your overall pension situation, you could afford to be exposed to a little risk.
5pen said:
The numbers you’ve given don’t suggest that taking the whole lot will push you over £50k and into the 40% tax bracket (£24k + £10k + £9.8k = £43.8k - and not all of that is taxable?).
If you still don’t wish to take the whole lot, I’d suggest investing the crystallised remainder in 100% equities in a low cost global tracker fund. If it’s been losing value over the last 6 years it sounds like it’s been invested in non-equity stuff and given that it is a small part of your overall pension situation, you could afford to be exposed to a little risk.
I didn't realise that the 40% band started at £50k now.If you still don’t wish to take the whole lot, I’d suggest investing the crystallised remainder in 100% equities in a low cost global tracker fund. If it’s been losing value over the last 6 years it sounds like it’s been invested in non-equity stuff and given that it is a small part of your overall pension situation, you could afford to be exposed to a little risk.
I don't really need all the cash right now, but it'll come in handy when I stop working, so I want to leave it somewhere relatively sensible for now.
I was only triggered into requesting the 25% tax free sum because I'd read rumours about that option possibly being withdrawn, and the fact that I'm having a lot of work done on the house which is taking pretty much all my monthly disposable income.
I don't want to start running down my savings just yet.
Plan is to stop working in 3 or 4 years, with everything done on the house, and a £30k rainy day fund, plus the remainder of the pension pot in reserve.
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