Are these good deals in the current market?
You really need to consult an IFA. [annuity value depends on current mortality predictions, your health, smoking habits, etc.]
But do your homework starting here:
www.moneysavingexpert.com/protect/1149249277,45547
Note the comment there : "Anyone with a ?trivial pension', where the total fund at retirement is worth less than £15,000, will be able to simply withdraw the cash, though only 25% of it will be tax free. "
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Thanks jbif.
1. The last IFA I consulted (on the recommendation of of the people who run my profession's pension fund) took no notice of what I required and recommended that I put all my money in equities which would show good returns in 10 years - I could be dead by then and wanted a combination of stuff, some for immediate access (like a holiday or even perhaps a different car), but he put 90% in equities/long term stuff and left enough for a day trip to Scarborough and a second hand pedal bike). Meanwhile, his commission of several thousand pounds seemed to go to him immediately. This was the second occasion on which I had consulted an IFA and the second occasion when I seemed to be a good source of excellent commission for them! Sorry to all you honest IFAs out there!
2. I saw that on moneysavings expert but could not find out if it meant "less than £15000" in total including the pension from my job or "less than £15000" in total in the AVC.
3. Clicked on a couple of links provided by a Google and they just seemed to lead to sites wanting to sell me their annuities.
Nevertheless, jbif, thanks for reading and responding - much appreciated.
Regards
Phil
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PhilW - it all depends on your age. It looks like you have a quote for a straight vanilla pension - no RPI increases and no widows pension. £902 pa suggests it's about 6.5% of the pension amount. This sounds about right at 60+ old.
Take a look in the Sunday Telegraph - that'll show you %ages for typically a £10,000 pension pot - yours I think, will be there or there abouts. Different firms give different rates - it helps if you are sick or smoke.
However good a deal you get - it's still daylight robbery! You can get maybe 0.3% more in any of dozens of Building Societies today and the money will still be yours to pass on to heirs and won't just die with you.
I reckon the whole pensions industry stinks - just because it looks complicated and there's of a bit of tax relief on the way in you get all these freeloaders (oops, I mean advisers) taking their lumps of it before you get it.
There, I feel better now.
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Thanks DE - but is it possible to just take all the money and put none into an annuity? - which is what I would like to do! I'd like to put it into a savings account of some kind with quick access but also with a good rate of interest, (or more likely, the kids will want to borrow some!) - don't want it tied up in an annuity so that I have to live another 15 years to get money back and if I snuff it SWMBO or kids gets nowt. (who gets the money then?? - bloomin' financial whizz kids I presume)
Thanks
Phil
(Glad you feel better - I still think it all stinks - especially after my endowment policies on the mortgages which I have held since 1976 promised "a surplus £30k for a retirement nest-egg plus a large terminal bonus of 90% of the mortgage" amounted to paying off the mortgage with an excess of £196 - suppose I should be grateful that it covered the mortgage!!)
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Mrs P's advise would be to liquidize everything. Most funds are in freefall. Cash into ISA's and other tax efficient pots - Gold looks good.
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PU,
Sorry, my last post crossed yours - I'm a slow typer!
Can I just take the money and forget annuities? I seem to remember that there is some rule about having to take out an annuity with the money before age of 75 - but what if I am dead by then (given the red wine and cigars consumed pondering this!) or have spent the money anyway........
Or am I just showing my ignorance of financial matters - trouble is, I've always followed the idea that "you can't take it with you" so have tended to spend rather than save (helped immensely for the last 35 years by Mrs W, Miss W and Mr W junior!)
Wish I could buy gold as cheaply as Gordon Brown sells it!!
regards and thanks to Mrs P
Phil
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>>Mrs P's advise would be to liquidize everything. Most funds are in freefall.
That probably explains why I've had an apologetic letter back from the firms pension department today, instead of a set of figures for (potential) year end retirement, as they can't get figures for the relatively small AVC portion from ******** ****.
I'm beginning to get the nauseous feeling I had when I realised the endowment morgage wasn't going to fully deliver, having had letters for years telling me it was fine.
Oh, carp.
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I saw that on moneysavings expert
The other good source of information is:
www.pensionsadvisoryservice.org.uk/
"The Pensions Advisory Service, is an independent non-profit organisation that provides free information, advice and guidance on the whole spectrum of pensions covering State, company, personal and stakeholder schemes."
Their Chief regularly appears on BBC 2 "working lunch" and is a really decent bloke, inspiring confidence about the quality of advice from the whole organisation.
www.pensionsadvisoryservice.org.uk/personal_and_st.../
Edited by jbif on 06/09/2008 at 20:57
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Cheers jbif - will have a look
Phil
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Thanks again jbif - no sitting in front of rubbish on TV tonight - got to do a lot of reading!!
Cheers mate
Phil
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Well guys, I can't thank you enough for the advice. Had a brief look at jbif's links and thought about Mrs PU's advice.
I gather that, if I "liquidise" I will get 25% of fund tax free and the remainder will be subject to 40% tax.
So, about £3500 "cash" then £11,000 with 40% tax = over £6000, so total will be knocking on towards £10,000 - £4000 goes to Darling Brown to waste.
Otherwise I could sign up for maximum possible annuity of £902 pa and hope I live for another 15 years to get my input back. And if I snuff it next year or next week it's all gone (to who - or whom?) and Mrs W, Miss W and Mr W junior get nowt. I'd rather spend it now and have a good few long trips to France and blow it on decent wine and food. And then if I snuff it next week Mrs W and "kids" will at least get the money and celebrate my demise by raising a glass as they spend the money!! As long as they say "Cheers Dad" I'm happy!!
Oh, and as I spend the cash I will also raise a glass to the "Backroom"!!
My only advice to others much younger than me would be - spend it or stick it under the mattress - anything you hear from our much vaunted financial institutions with regard to "investing for the future" is ...........(can't think of a suitable word to escape the swear filter)
Will make a decision on Monday after the effects of the red stuff has worn off - any other contributions welcome!!
Best wishes
Phil W
PS Just thought of another way of spending it - an HJ Backroom meeting where I buy everyone from the Backroom who has given me good advice a pint or two (I'd even invite HJ himself!!) - that would dispose of £10,000 pretty quickly!!!
Look out for my last post!!
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PhilW - a bit of a major edit here: Obviously I've lost touch a bit with the going rates.
Today's DT gives Prudential offering 7.3896% pa for a 65 year old male for a plain pension. Also, Canada Life will give you 6.0084% for a joint life if you are 65 and SWMBO is 60. (NB - No reduction on first death).
These new higher figures still don't change my views of the industry though.
Unfortunately owing to the tax rules - because you had tax relief on payments in to the system you can't just take the lot on its way out and spend it as you wish. You must get an annuity for 75% of the sum as a minimum. You must also take it by 75 years of age. (I think there's a get out for family pensions, where you can pass the pension on to your kids, but I don't know too much about this area).
PS I am a keen amateur who takes an interest in these things because my time is coming soon. I must advise that I am no expert (as the edit shows!).
My plan (like most people's) is to take the 25% as cash and get an annuity for the rest.
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Dulwich E
Thanks again "keen amateur", and I must seem a complete ignoramus but
"You must get an annuity for 75% of the sum as a minimum. You must also take it by 75 years of age"
Does this mean that
1.the max I can cash is 25% and they keep the rest which I must convert to an annuity by age of 75 or
2. that I can take the 100% now and when I am 75 (as if!!) they chase me up and say " oh, by the way, 15 years ago you cashed in all that money, the darling Brown took 40% in tax but now you have to find the money to buy an annuity"
or
3. do I have to stick the 75% somewhere else untouched until I am 75? And if I don't get there, they turn round and say "oh bad luck old dead thing, and by the way, your wife and kids also get nothing - we won the bet. (I'm 60, wife is 58)
or,
4.I can leave all it sitting there until I'm 75 having gained no income from it and then I have to get an annuity?
I have to confess that I just don't get it and just wish I had stuck £50 a month into a building soc account (or just stuck it under the mattress - even the latter would be £12,000 cash under the mattress)
As it is it appears, I can take £3500 tax free and then take an annuity of £600 - £700 (at rates you quoted) a year for about 17 years before I get my money back - and who would bet that they would definitely live to age 77? Not me.
Blimey, I would have been better sticking the money on the horses - and I've only had about 3 bets (on the Grand National) in my life.
Seems like a no win situation - wish I had spent it, on more cigars and wine.
Thanks for your help,
Best wishes for a long, happy and financially secure retirement.
Good job MrsW has found me a new job - the money from that is going under the mattress
Phil
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Stick it in Premium Bonds....
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I would PU, but can you confirm whether actually get all the £14000 to stick in premium bonds - or do I have to put 75% in an annuity?
Or get 25% to stick in PBs, 75% is also taken but darling brown steals 40% of that before I stick it in PBs??
really don't get it - sorry - thick as the proverbial when it comes to money/finance - must remember- when I get paid must spend it - that way I get something for my money and none left over to worry about. (It's called Brownian economics - especially if I spend twice as much as I earn and even more Brownian if I totally waste the money)
P
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All as I understand it - but, I am not an IFA...
As mentioned further up the thread, if the total pot is less than £15000 it counts as "trivial" so you could get it ALL back, cash in hand, on retirement LESS tax payable to disaster darling.
If you choose your timing in the financial year you may not get into 40% tax (depending on your income in the year)
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Phil:
A retired lady I know had the option of taking her annuity [pension was with Equitable] at age 60 when she retired. She too had found a new job on reaching 60 and so decided that it might be better to allow the investment to grow for another 10 years when she would get a better annuity based on the fact the funds would have grown and that she would have a lower life expectancy then.
For a start, Equitable funds collapsed in value [and unlike Northern Rock, the Government did not step in to help ]. To add insult to injury, when she reached 70, the actuaries had decided that women now lived 10 years longer than the assumptions which applied when the lady was 60. So in hindsight, she lost out on both counts.
I.M.O. only - this is not advice - As suggested by others, cash in your pension or failing that option being available, take up your annuity now. Exercise your right to get other annuity quotes from the market.
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AS I understand it (and I may be wrong) the £15,000 applies to the aggregate of all pensions. As apparently you have a further pension, I don't think you are are permitted to liquidate this particular one. On the other hand... I don't know what sort of other pension your other one is, and I wouldn't know what the implications of the particular flavour would be anyway.
Doubt that helps much...
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jbif, MM, Another John (and all others previously),
Thanks for your help again. I understand it as MM does.
Yep, I do have another pension (I was a teacher! - didn't really want to admit that!!) so I suspect the "notional" value of my pension fund is way over £15,000 despite the fact that there is really no "fund". ( I remember reading a while ago that if all the money paid into teachers' pension fund had actually been paid into a fund instead of being swallowed and spent by various gov it would now have a £75 billion surplus - because teachers die young!)
Anyway, I am hoping to be able to cash the lot, get £3500 tax free and be taxed on the rest "as income" - it shouldn't be at a high rate given my pension (I haven't got enough "years" for a full pension.)
I think SWMBO and I will get better value in this way, rather than hoping I live a further 15 years to get the money back (and if I die before she gets nowt (How is that fair??)). If I get to 75 I will have forgotten all about this FSAVC anyway.
Thanks all for responses; it's good to have "outside" contributions rather than me and Mrs W just going round in circles.
Phil
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Yep, I do have another pension (I was a teacher! - didn't really want to admit that!!)
The lady in question I referred to above in my post was also a teacher, and did not have enough years to get a full pension. The job she got after retiring was in teaching and the Teachers Pension Agency [is that the correct name] allowed her new job to count towards a furhter enhancement of her Teacher's pension. [Look it up in the TPA scheme.] I remember reading recently that the Government was encouraging teachers to stay on and continue teaching, so if you can do so, you should be able to continue to add to your existing teacher's pension.
Edited by jbif on 08/09/2008 at 22:55
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jbif,
Yes, I'm aware of the TPA scheme ..... but
After 30 odd years of teaching I had had enough!! Not of the actual teaching, or the kids because I enjoyed the teaching and contact (not physical you understand!!!) with youngsters. I'm also still enthusiastic about my subject but became fed up with all the jargon/targets/mission statements/action plans/development plans/constant changingand watering down of syllabus etc that in my experience do little for the broader education of these youngsters - you can't digress onto topics that they find particularly interesting because you are always saying "we must do this or that" (usually to complete an overcrowded syllabus so that you can pass your exams so that the Department/school can maintain/improve its league standing - nowadays, children are taught for the good of the school not the child).
Well, that's my impression anyway.
So I have no intention of going back to teaching!! - and my wife has found me a new job - long hours but such a change and challenge that I am really enjoying it!! (So far).
Incidentally, it was the TPA who put me in touch with an IFA who came up with a scheme suggesting that I put about 90% of my capital into long term funds in equities which would be virtually untouchable for at least 5 years and some 10 years before they started showing a return - meanwhile he got a sizeable commission very quickly!! Hence my distrust of IFAs!!
Sorry if I've waffled on too long - but that's what I have done for 30 odd years!!
Thanks for your interest and suggestions - much appreciated!!
Best wishes
Phil
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IF you do buy an annuity do not forget that you can get a better rate if you have an unhealthy life style, because you may not live so long. Thus smokers, drinkers, those with high blood pressure etc can get better rates, quite apart from market forces. While I obviously wish you a long and happy retirement, if you are on 40 a day and drink a lot you can get a better anuual return from your annuity fund.
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Thanks AS
(he types very slowly, while looking through the bottom of a glass of red wine, surrounded by a haze of cigar smoke).
;-)
Phil
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The intruiging thing is that (as mentioned earlier) you'd expect the eventual rate of annuity payout to be significantly higher for each year you delay taking it. So, delaying taking the annuity for one year costs you say £902 in income for that year. But, if you look at the gradually increasing rates year on year (and assuming nothing else changes - which of course it does) it would maybe take you to age 85 before the extremely small increase in the new better annual income actually returned your deferred £902. After around age 85 you are quids in!
I think the moral of the story is don't delay taking your pension. If you don't need it then just bank it until you do need it. Note: HM Government have a deferal scheme on the state pension too: delay taking it by a year and you lose out on £6000 gross for that one year. When you do finally take it, the annual amount will be a tad higher - but again. you've got to live to a good while to make up the £6000 gross lost.
I emphasise I am but a keen amateur of all things financial - nothing I say should be taken as proper financial advice. This post may contain nuts.
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Thanks DE,
"keen amateur" you may be but you are not trying to take commission from me! The "keen amateurs" on this forum give sound advice, unbiassed and based on experience - and you are no exception. Some of the points you make confirm "opinions" I have about delaying taking the FSAVC or taking an annuity with it and it's good to have them confirmed - at least I am not alone!!
Not thought about the state pension yet - but the way I am thinking at the moment is to take everything I can now and stick it in an accessible account (or 2?)- I might be quids in at age 85 but I will more likely be 6ft under or at best totally ga-ga.
Might as well go skiing I reckon, as in spending the kids inheritance, my knees can't take the proper skiing.
Thanks again for your interest and input (and to all others who have taken the time to respond - I never expected such a response!) Virtual pints all round - and if I ever meet any of you, real pints!
Regards
Phil
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