Pensions rant

[Tashyboy]

So Missis T retires and starts bugging me for the rest of her life in July.
I already drag two pensions, Missis T was sent some figures for her to mull over. I asked another one of my pension companies for a forecast so we could sit down and see what we would claim as lump sums and weekly pensions. Easy peezy.
Missis T comes back from her interview last week and told me that they could give her a figure for highest lump sum, lowest lump sum, but not the highest lump sum tax free. They didn't have an idea and blamed it on the tax office. So how do we make a decision then. Not knowing what the lump sum and weekly figure is.
My estimate came yesterday, I rang the pension company to run through some enclosed figures re what percentage can I us as a lump sum, what is the ratio £1 to?, and guess what. The estimate they sent me is wrong, it is no where near what they sent me. Eh. This is not eeny meeny miny bloody mo were playing here.
He says I will personally send you another " correct" one.
Grrrrrrrr bloody pensions people.

 

[rudebhoy]

I thought it was just a straight 25% of the pension pot which you can take tax free?

If you don't actually need the tax free lump sum, you would be better off in the long run just taking the full sum as a regular pension payment as it will pay out more.

 

[Blue in Munich]

I thought it was just a straight 25% of the pension pot which you can take tax free?

If you don't actually need the tax free lump sum, you would be better off in the long run just taking the full sum as a regular pension payment as it will pay out more.

I'll disagree, a bird in the hand and all that. Without knowing your personal circumstances, my inclination would be to see how much the difference in monthly pension with or without the lump sum and how long it would take on a simple draw down from the lump sum. Then look at your health & lifestyle and think how long you might realistically live and do the sums. In my case it would have taken 19 years before I lost out. As an ex-smoker whose parents both died relatively young I figured that 19 years was probably optimistic. Very nearly vindicated last year with the health issue.

The other thing is what will you use the lump sum for? In my case part of it paid off the mortgage, so while my monthly income was reduced so were my outgoings so was justified in my case. If it is going to allow you to do something that will greatly increase your quality of life in your remaining years then it's the correct thing to do.

The only person who will know the right answer is you; well, no, actually it's Mrs T and I'm sure she'll let you know the answer in due course……

 

[Tashyboy]

I thought it was just a straight 25% of the pension pot which you can take tax free?

If you don't actually need the tax free lump sum, you would be better off in the long run just taking the full sum as a regular pension payment as it will pay out more.

Am sure it is 25% but we dont know of what in both instances. Will take the max on both. Which will more than help top up weekly pensions and be there for treats. Motorhome,car, shinys, jols. Would be happy knowing figures though. Our weekly is quite decent (for us) and knowing missis T she may well wanna spread some wealth the kids way.

 

[SteveJay]

If you don't actually need the tax free lump sum, you would be better off in the long run just taking the full sum as a regular pension payment as it will pay out more.

Yes, it will pay out more each month, but its not straightforward, at least not for me. Lots of variables and assumptions needed so would check your own figures.
You should consider the tax you will pay if foregoing any lump sum, interest receivable on that lump sum (accept its a pittance now but it might go up over the term you need to base it on (which needs to consider life expectancy and any impact on dependant's pension should you die)).
I have done sums recently as I hope to retire within 4 years, and reckon it will take me over 20 years to recoup an amount equivalent to my tax free lump sum (albeit without fully calculating the time value of money as you can't predict inflation and interest rates accurately over the long term).
You should also think about future spending requirements. In your 80's you won't probably need as much income as in your 60's.
So individual circumstances may vary, so would advocate getting proper advice.

 

[Tashyboy]

Yes, it will pay out more each month, but its not straightforward, at least not for me. Lots of variables and assumptions needed so would check your own figures.
You should consider the tax you will pay if foregoing any lump sum, interest receivable on that lump sum (accept its a pittance now but it might go up over the term you need to base it on (which needs to consider life expectancy and any impact on dependant's pension should you die)).
I have done sums recently as I hope to retire within 4 years, and reckon it will take me over 20 years to recoup an amount equivalent to my tax free lump sum (albeit without fully calculating the time value of money as you can't predict inflation and interest rates accurately over the long term).
You should also think about future spending requirements. In your 80's you won't probably need as much income as in your 60's.
So individual circumstances may vary, so would advocate getting proper advice.

Also what we have factored is that in 13 yrs. our state pension will kick in as well. 👍

 

[Lord Tyrion]

Blimey, that's an early retirement. Well done you two if you can manage it.

 

[arnieboy]

I spoke to two guys in finance, one said take the maximum 25% lump sum the other said take the increased monthly pension. You may as well flip a coin!

 

[Tashyboy]

Blimey, that's an early retirement. Well done you two if you can manage it.

Ave just landed in fuettaventura and if we dont kill one another this week. We might manage retirement. Golf course couple of miles from hotel and bats at home 😥

 

[Foxholer]

Without knowing all the numbers....At that low age of retirement, the 'pension only' option is likely to provide a better return, specially for a women (few years longer life expectancy). But it does depend on how long she actually lives and whether you use the tax free allowance 'efficiently' - for example, paying off an 'expensive' mortgage or using it to invest successfully! It's this sort of situation where a professional financial advisor is definitely worth their fees, though the final decisions are always up to you!

Your/her pension provider(s) should be able to provide a 'projection' that will provide most of the numbers you need!

Ave just landed in fuettaventura and if we dont kill one another this week. We might manage retirement. Golf course couple of miles from hotel and bats at home 😥

Hire some then!

 

[Hobbit]

I spoke to two guys in finance, one said take the maximum 25% lump sum the other said take the increased monthly pension. You may as well flip a coin!

Taking the max 25%, potentially, limits your income in retirement depending on how you use that lump sum.

If your pension is more than the £10k+ limit before taxation the Chancellor will get his paws in. If you try and limit the amount over £10k and balance the diff by drawdowns etc you could end up with access to more money but pay less tax.

Speak to an expert/ accountant who'll know how to limit your tax.

 

[Tashyboy]

Taking the max 25%, potentially, limits your income in retirement depending on how you use that lump sum.

If your pension is more than the £10k+ limit before taxation the Chancellor will get his paws in. If you try and limit the amount over £10k and balance the diff by drawdowns etc you could end up with access to more money but pay less tax.

Speak to an expert/ accountant who'll know how to limit your tax.

One of the advantages of taking the lump sums is that my pension is just above the tax threshold and missis Ts is below so i can transfer £1k of my taxable pension to her. At the end of the day tax will be next to nowt. With no mortgage and loans etc = happy days.

 

[rudebhoy]

Am sure it is 25% but we dont know of what in both instances. Will take the max on both. Which will more than help top up weekly pensions and be there for treats. Motorhome,car, shinys, jols. Would be happy knowing figures though. Our weekly is quite decent (for us) and knowing missis T she may well wanna spread some wealth the kids way.

The total current value of the pension pot is a pretty basic piece of information. I'd be amazed if they can't tell you that.

As to taking the lump sum or not, I agree it comes down to individual circumstances. Not taking it was a bit of a no-brainer for me. I didn't need the money as everything had been paid off, and I had a reasonable sum in the bank/investments after my redundancy payment. I am in decent health and have a reasonably healthy lifestyle. I've got quite a few elderly relatives, so the genes are reasonable. I did some calculations and 75 was the break-even point for me (if I died before 75, I would have been better with the lump sum, every year I survive after 75, taking the full amount in pension paid more).

Pension is index linked and has a very good 2/3rds widows pension. my missus is 9 years younger than me, so on average should survive me by 13 or 14 years, her pension then would also be 25% more then by not taking the lump sum.

 

[Crazyface]

I'm confused over pensions. I thought I "contracted out" but apparently the government brought us all back in?????? I've got two tiny company ones that predict I'll be able to buy a jar of coffee a week with them and this new fangled one the government introduced two years ago.

BUT I HAVE TWO HOUSES FOR RENT !!!! So when everyones pension is declared null and void in a few years time as it is admitted that they were never really going to work and that a yearly cull of OAPs will have to take place to be able to afford the government one, I'll still have the income from them so will be spared!

 

[PhilTheFragger]

I'm confused over pensions. I thought I "contracted out" but apparently the government brought us all back in?????? I've got two tiny company ones that predict I'll be able to buy a jar of coffee a week with them and this new fangled one the government introduced two years ago.

BUT I HAVE TWO HOUSES FOR RENT !!!! So when everyones pension is declared null and void in a few years time as it is admitted that they were never really going to work and that a yearly cull of OAPs will have to take place to be able to afford the government one, I'll still have the income from them so will be spared!

And you have the capital value of the properties in the background as well
so you always have the option of selling one and running the other if you need a top up