Omega Owners Forum
Chat Area => General Discussion Area => Topic started by: Terbs on 10 July 2025, 20:03:26
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I have some small pensions with Rothesay. Mainly residue left over from previous transfers. I have had a letter from them offering me one off lump sum payments. Anybody else had this offer from a pension company. :)
I don't understand tax codes, but the biggest pension is £960 per year. This is paid £80 month, but they stop £36 pm tax. Giving me £44.
Obviously, they are stopping tax also from the amount my state pension is over the £12,570 tax allowance.
They have offered me £8,500 final lump sum payment. What I am concerned about is how they are going to tax it.
Any suggestions :y
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Chances are the £8500 will be classed as income in the tax year you receive it, so will be taxed at 20/40/45% depending on what your marginal rate of tax is in that year.
However, it's also possible that HMRC will initially think you are going to receive £8500 every month for the rest of the year, rather than just as a one off payment. If that happens you may pay a large amount of tax initially, particularly if it's paid in April/May, but the excess will then be refunded the throughout the year.
If they're offering £8500 to buy you out of a £960 p/a pension, then they will 'lose'/you will 'win' if you live less than 8.85 years. They will 'win'/you will 'lose' if you live more than 8.85 years. So "do ya feel lucky punk - well do ya?"
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Agree HMRC are crap on one off payments and will often treat them as if you're going to get the same every month. I'm assuming these are defined contribution pensions not defined benefits (AKA final salary). Personally I would (and have) transfer them all into one SIPP with a low cost provider like Vanguard. That way you'll know you are getting near enough the full value and you can then decide how and when to take the benefits, probably a 25% tax free lump sum then drawdown what you want/fits with your tax situation, as and when you want.
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reading between the lines a bit here but i am guessing these are defined benefit pensions and the scheme is in the process of winding up and transferring to an insurer. that is what Rothesay life are.
if that is right then i expect the lump sum offered is known as a winding up lump sum and as you have commenced your pension, taxed as income. The offer letter you have received should say this somewhere.
It seems like you are being taxed at 45% on the £80 per month pension. You'll have to check if that is right but if it isnt you may need to sort it with HMRC, possibly completing a tax return.
also building on LC0112G's comment about 8.85 years, don't forget the contingent spouse's pension which will be extinguished by a winding up lump sum. its the only time it happens, normally commutation of pension for lump sum only impacts yours and not your spouse's.
The main reason for this being offered in winding up scenario is that the operating cost of paying a small pension is material vs the pension ( payroll/admin etc) cleaning up small pots makes admin simpler.
hope this helps
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Maybe not 100% relevant but Pension related still.
Just had this in my email ad maybe worth considering for some. (Posted at the end)
My situation .
I had 2 pensions that have not been paid into since I was 20 odd years old (now 64) and had forgotten about them. As I have moved house a few times it seems the address changes have always caught up on the pensions details.
1st one with Prudential matured this year year with a final value of £4040 with 2 choices, Take it all, Or split into Half now and reduced monthly payments or no lump sump and higher monthly payments of a few £ per month.
I was advised when I cashed it the UK Gov would take 25%, either way I cashed it and used it to carry on setting up in business.
The works pension was valued at around £35k a year or 2 ago, and now seems to be worth 10 times the Pru value at approx £44k deduct the Tax so will get options I would think same as Pru pension
But not sure now what to do with it knowing what I have just read regards the state pension. Plus not knowing if the the maturity date remains the same as the original date to retire at 65
https://moneyweek.com/personal-finance/pensions/603808/should-you-defer-your-pension-and-stay-in-work?utm_term=36051AF0-87ED-438E-B9D2-E4FCE239B6B6&lrh=74ff7ee269e60fbb9291912e1b9028e7f2a50c9c9bbd97b7e6c4026d6c7b5014&utm_campaign=3854FBCB-FE1F-457E-9C9A-87C5805A0127&utm_medium=email&utm_content=41B36A8A-C2AA-4671-AAEA-45E428806617&utm_source=SmartBrief
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Ok, to clear up any confusion....the three small pot pensions I have been offered are two tiny pensions (residue) when I transferred the main amount from Prudential to another company. The third amount is from when I contacted out of SERPS for a short time. These pensions were taken when I retired, 25% tax free lump sum, then the rest paid as pension.
Evidently, due to pension changes, these small pots can be offered as a wind-up deal.
At the moment, the amount I receive from State Pension exceeds the Personal allowance (PA), so the amount more than the PA is added to the SERPS pension, then taxed at 20% and that tax is taken from my monthly payment from them.
So, on that basis, I assume the amount I receive over the PA, will be added to the £8500, then this amount taxed at 20%, and taken from the £8500. I will then receive no more payouts from the pension company.
Obviously I have already paid a bit of tax on the residue this year, and assume that this will be adjusted at the end of the tax year.
My main private pension, from another company, is taxed at 20%, and again, I assume that come the new tax year, my residue over the PA will then be added to that pension for tax purposes.
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Yes, you're basically correct. However, the way HMRC/PAYE works is that they see you getting a 'lump' in month one, and then assume you'll be getting the same every month for the rest of the tax year. This results in you paying a lot of tax on the lump in the first month, and then in subsequent months they basically refund you a bit when you don't get the same lump in months 2,3,4 etc. At the end of the year it will (or should!) all come out even, but you will have paid tax up front that then gets refunded.
If the lump you get is £8500 ish, and if HMRC then assume you'll be getting that every month, then they'll work out that your income for the year will be well over £100K, and that'll put you into the 45% tax bracket. It might also start affecting any benefits you are on. It's this kind of thing you need to make sure does not happen, coz it can be a ball ache to sort out afterwards.
If the payment is in April (month one of the tax year) then the above is almost bound to happen. If it's late in the tax year (Nov, Dec, Jan) then it's usually less severe since your yearly income won't look like being anywhere close to £100K (or £50K for 40%).
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Maybe not 100% relevant but Pension related still.
Just had this in my email ad maybe worth considering for some. (Posted at the end)
My situation .
I had 2 pensions that have not been paid into since I was 20 odd years old (now 64) and had forgotten about them. As I have moved house a few times it seems the address changes have always caught up on the pensions details.
1st one with Prudential matured this year year with a final value of £4040 with 2 choices, Take it all, Or split into Half now and reduced monthly payments or no lump sump and higher monthly payments of a few £ per month.
I was advised when I cashed it the UK Gov would take 25%, either way I cashed it and used it to carry on setting up in business.
The works pension was valued at around £35k a year or 2 ago, and now seems to be worth 10 times the Pru value at approx £44k deduct the Tax so will get options I would think same as Pru pension
But not sure now what to do with it knowing what I have just read regards the state pension. Plus not knowing if the the maturity date remains the same as the original date to retire at 65
https://moneyweek.com/personal-finance/pensions/603808/should-you-defer-your-pension-and-stay-in-work?utm_term=36051AF0-87ED-438E-B9D2-E4FCE239B6B6&lrh=74ff7ee269e60fbb9291912e1b9028e7f2a50c9c9bbd97b7e6c4026d6c7b5014&utm_campaign=3854FBCB-FE1F-457E-9C9A-87C5805A0127&utm_medium=email&utm_content=41B36A8A-C2AA-4671-AAEA-45E428806617&utm_source=SmartBrief
Skrunts - go and see an IFA - a proper whole of market INDEPENDENT Financial Adviser - not some bank rep or insurance co employee. They will assess your options, taking into account your desires and explain to you what is going on. It is VERY, VERY likely they will get you a better deal for your money that what you're offered by the companies directly - yes even after you've paid their fees. They might charge you 1-3% of your pot, but could easily get a 20% higher payout
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Skrunts - go and see an IFA - a proper whole of market INDEPENDENT Financial Adviser - not some bank rep or insurance co employee. They will assess your options, taking into account your desires and explain to you what is going on. It is VERY, VERY likely they will get you a better deal for your money that what you're offered by the companies directly - yes even after you've paid their fees. They might charge you 1-3% of your pot, but could easily get a 20% higher payout
I took advice, But chose to take the money as the cash can
and will continue to make more money with my plans that it will ever earn in the hands of a company looking after themselves rather than me. :y
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Good luck with that.
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Scrunts - you cannot possibly know that. Cash rarely makes gains over inflation. Even a simple tracker funds will beat cash, typically returning 3-5% above inflation. More advanced (and yes riskier) funds can return 8-12%. I aim for an average 8% above inflation (so typically 10%-12% absolute).
The questions you are asking imply you don't understand how your pension works, or what it's worth. A good IFA will explain all that for you, and if s/he thinks you're already doing a good job will tell you so, and not charge you a penny. However, when it comes to 'cashing in' a pension an IFA does have access to better 'deals' than the general public, so you WILL get more money from them even after charges than you can get by yourself.
The man from the Pru is not an IFA. The man in the Bank branch is not an IFA. The Pensions Advisory Service (PAS) people are not IFA's. Only real IFA's can call themselves IFA's nowadays.
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Scrunts - you cannot possibly know that. Cash rarely makes gains over inflation. Even a simple tracker funds will beat cash, typically returning 3-5% above inflation. More advanced (and yes riskier) funds can return 8-12%. I aim for an average 8% above inflation (so typically 10%-12% absolute).
The questions you are asking imply you don't understand how your pension works, or what it's worth. A good IFA will explain all that for you, and if s/he thinks you're already doing a good job will tell you so, and not charge you a penny. However, when it comes to 'cashing in' a pension an IFA does have access to better 'deals' than the general public, so you WILL get more money from them even after charges than you can get by yourself.
The man from the Pru is not an IFA. The man in the Bank branch is not an IFA. The Pensions Advisory Service (PAS) people are not IFA's. Only real IFA's can call themselves IFA's nowadays.
My point regards my Pru pension was that the yearly payout is worthless compared to what I can earn utilizing it in other ways.
We all have different views and options as to what we do and how we structure our lives. My other pension may remain and run along side my state pension when I am old enough.
In the mean time the money once cashed was more useful to be used to sort out odds and ends.
So in-the future with financial advice, I will invest into various options and utilities, but also have options with fixed term and easy access accounts, like an example I have never had an ISA but found out over the last month that Martin Lewis has mentioned they may reducing the limits, and some one else mentioned its possible to multiple ISA's where i thought you were only allowed 2 , 1 being a stocks and shares. Another friend has the the max amount in "Ernie" and is lucky enough to make a nice yearly earner from it.
I came into some money many years ago and talked with my brother about putting some of it into Scottish widows, he advised against it, I wish i had ignored him.
But I stay open minded, and any advise is always welcome.
Same with credit cards with the amount of air miles that can be accrued as that can easily exceed 10k miles a month.
We have decided to buy a house as I currently live on my own so as we move in together more space will be required so funding a mortgage may become the next priority but at 64 wont be simple.
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Scrunts - you cannot possibly know that. Cash rarely makes gains over inflation. Even a simple tracker funds will beat cash, typically returning 3-5% above inflation. More advanced (and yes riskier) funds can return 8-12%. I aim for an average 8% above inflation (so typically 10%-12% absolute).
The questions you are asking imply you don't understand how your pension works, or what it's worth. A good IFA will explain all that for you, and if s/he thinks you're already doing a good job will tell you so, and not charge you a penny. However, when it comes to 'cashing in' a pension an IFA does have access to better 'deals' than the general public, so you WILL get more money from them even after charges than you can get by yourself.
The man from the Pru is not an IFA. The man in the Bank branch is not an IFA. The Pensions Advisory Service (PAS) people are not IFA's. Only real IFA's can call themselves IFA's nowadays.
My point regards my Pru pension was that the yearly payout is worthless compared to what I can earn utilizing it in other ways.
We all have different views and options as to what we do and how we structure our lives. My other pension may remain and run along side my state pension when I am old enough.
In the mean time the money once cashed was more useful to be used to sort out odds and ends.
So in-the future with financial advice, I will invest into various options and utilities, but also have options with fixed term and easy access accounts, like an example I have never had an ISA but found out over the last month that Martin Lewis has mentioned they may reducing the limits, and some one else mentioned its possible to multiple ISA's where i thought you were only allowed 2 , 1 being a stocks and shares. Another friend has the the max amount in "Ernie" and is lucky enough to make a nice yearly earner from it.
I came into some money many years ago and talked with my brother about putting some of it into Scottish widows, he advised against it, I wish i had ignored him.
But I stay open minded, and any advise is always welcome.
Same with credit cards with the amount of air miles that can be accrued as that can easily exceed 10k miles a month.
We have decided to buy a house as I currently live on my own so as we move in together more space will be required so funding a mortgage may become the next priority but at 64 wont be simple.
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Can't go wrong with property , we were fortunate enough to receive a quite unexpected windfall about 3 years ago we now both have the maximum in premium bonds and have done very well from them , we both have ISAs & we were already mortgage free so had a villa in EL Campello built & as my son in law has his own building business we now purchase & renovate properties, ignore the amateur "experts" on here and trust your own instincts , just remember if it sounds too good too be true it's probably 'dangle berries', good luck with your financial future.
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I'm quite dull with my pension, it all goes into the independent company one. I'm told it's separate from the main business and rotated employees are the trustees. I could apply if I wanted to but it's not something I'm interested in.
This thread reminded me to check, not sure if it feels right by my fund value is 51% more than what I have contributed over time. Sounds to high really, but that's what the dedicated site is telling me :-\
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That sounds pretty conservatively invested.
My work one, Aviva iirc, is sitting at nearer 65% although I have only been here 3 and a bit years so the actual amounts will look very different.
If you're happy with the pot, leave it as it is... but it could be working harder, although if it's managed by your peers, you might not have much say in the funds you can put it in. Also how much the company contributes will have a bearing. Our match is 11% for example.
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Before i retired, the dormant pension from a long term employment gained far more than when i was making my contributions and added AVC's. Not that it was that large even then. Nearly run out now anyway after 15 years of retirement. :D
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Time is definitely a key part of that :y
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That sounds pretty conservatively invested.
My work one, Aviva iirc, is sitting at nearer 65% although I have only been here 3 and a bit years so the actual amounts will look very different.
If you're happy with the pot, leave it as it is... but it could be working harder, although if it's managed by your peers, you might not have much say in the funds you can put it in. Also how much the company contributes will have a bearing. Our match is 11% for example.
I'm now at an age where mine is moving away from risk into lower returns. I guess a sensible move, as a big hit now might not have time to recover before I want to retire.
Mind you, I have no idea what to do when I do press the button. My original final salary is probably a no brainer to just take as intended (with or without the 25% tax free sum?). My DC ones though, no idea. I suppose I should really look into it.
Any experts here? I have a Q?
For sake of argument, lets say I I have 4 pensions (to makes maths easy), 1 is a DB deemed to have a value of £10k, and the other 3 being DC each having a value of £10k each.
This 25%, which comes to £10k in this example, could I take that all from 1 pension pot, leaving the others untouched? Or does it have to be 25% from each pot? I ask, because its very beneficial to not take 25% from my DB one.
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From my research it's actually be advisable not to take the 25% - I'm in a simple world with just a single pension pot.
But from what I can see, the 25% lifetime/entire pot, by not taking it in one big lump, rather take a bit at a time to "top your pension pay up"
eg take say 38k and stay under the 40% threshold. Then each year take a little bit cash from the 25% - say 12k - That £12k is tax free and won't be taxed at 40%
So you end up with a 50k pension, but you only ever pay max 20% on it
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I've been playing a lot with my pension contributions over the last 3 or 4 years, to actually gauge how much I need to live as I do now. I was quite surprised how little I need, and I've been taking this very limited income for around 2 years now, so I think its a reasonable figure. In fact, despite the inflation over the last 2 years, the figure is still working.
Turns out, I'm a really cheap date, LOL.
Downside now, I've been paying so much into my pension (your 31% is small fry!), I now need to find the best way to get it out without donating too much to Rachel from Accounts, because I'm perfectly capable of pissing it up the wall as much as she will.
I'm at a point where (most - I'm always going to put in what I need to get the company contributions to max, and also to stay away from higher tax brackets) future contributions might be better to take in salary, pay the tax now, and invest with less of a tax burden when I take the money out....
...but I prefer to bury my head in the sand ;D
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I've been playing a lot with my pension contributions over the last 3 or 4 years, to actually gauge how much I need to live as I do now. I was quite surprised how little I need, and I've been taking this very limited income for around 2 years now, so I think its a reasonable figure. In fact, despite the inflation over the last 2 years, the figure is still working.
Turns out, I'm a really cheap date, LOL.
Downside now, I've been paying so much into my pension (your 31% is small fry!), I now need to find the best way to get it out without donating too much to Rachel from Accounts, because I'm perfectly capable of pissing it up the wall as much as she will.
I'm at a point where (most - I'm always going to put in what I need to get the company contributions to max, and also to stay away from higher tax brackets) future contributions might be better to take in salary, pay the tax now, and invest with less of a tax burden when I take the money out....
...but I prefer to bury my head in the sand ;D
You must be hitting or over the free pension allowance? I've got a spreadsheet working out the previous 3 years of contributions, as you can use a bit from that before you hit the limit overall.
But what nobbled me a bit, is I did not realise is the cap includes company contributions.
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Latest rumour is that Rachel from complaints is going to include pension pots in inheritance tax if you die before you retire.
Politicians know three fifths of far call about economics so royally screw the countries economy.
Then simply steal more of our money from us to and use it to clear up the mess they have made.
They should be shot in front of their families.
Then their families shot for spawning them in the first place.
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Then simply steal more of our money from us to and use it to clear up the mess they have made.
But blame it on the previous government. It's always the previous government's fault.
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My advice is, get a financial advisor ::) :y
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Then simply steal more of our money from us to and use it to clear up the mess they have made.
But blame it on the previous government. It's always the previous government's fault.
Well yes, the previous Govt. were undeniably useless, but its quickly become apparent that this lot are the worst most clueless excuse for a Govt. of my lifetime.
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Then simply steal more of our money from us to and use it to clear up the mess they have made.
But blame it on the previous government. It's always the previous government's fault.
Well yes, the previous Govt. were undeniably useless, but its quickly become apparent that this lot are the worst most clueless excuse for a Govt. of my lifetime.
In the past, there have been governments that I have disliked and governments that I thought were trying to make a difference and were trying hard.
But this is the first government that I have hated....really hated. From the dangerous, two-faced twàt at the helm, right down through the cabinet, to the baby faced newbies at the bottom. There is not even one, small part of their agenda that I can see any merit or fairness in.
I despise them all and hope I get to see them fall on their arses. Unfortunately, I doubt that will happen before they have finally finished this country off. Bastards.
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I felt that way about the Blair Govt. It seemed to me that he / they were trying their hardest to destroy anything good and decent about the country while they had the chance.
This lot seem to have picked up the baton but are too stupid to do much with it apart from run around in circles and hammer anyone who has anything to call their own.
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I felt that way about the Blair Govt. It seemed to me that he / they were trying their hardest to destroy anything good and decent about the country while they had the chance.
This lot seem to have picked up the baton but are too stupid to do much with it apart from run around in circles and hammer anyone who has anything to call their own.
It's what they're spending that money on that is different now. When they came to power just over a year ago, there were 3.2 million people on benefits with no requirement to look for work, a lifetime on benefits. That number has increased, by over 30%, to 4.2 million.........in a year.
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Tbh, I can see quite a few ordinary working people reaching the point where they think " If you cant beat them join them".
If I was a lot younger I might be tempted myself.
Why work hard all your life to have half your money taken away and given to those who dont want to bother ?
We can only hope that the pendulum will swing back the other way, and theres signs of it happening.
The frightening thing is that it has swung so far off the scale in one direction that you have to wonder how far it might swing back in the opposite direction.
But if it doesnt swing back, the country is finished.
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Meanwhile, at the now infamous Bell Hotel Epping.
https://www.essexlive.news/news/essex-news/man-charged-sexual-assault-after-10422549
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Any experts here? I have a Q?
Pension advice is a regulated area, and legally advice can only be given by those qualified to give it. No professional advisor is going to stick their neck out and give you (or anyone) advice on t'interweb without reviewing your current situation, future ambitions, appetite for risk yada yada, because they would end up being be fined millions by the FCA. That's why I keep saying that if you're asking these sort of questions then you really should go and see a good IFA - you get regulated advice with the backup that if the advisor screws up you can sue for mis-advice.
That said, what I would do is....
I would leave any defined benefit pensions be, and take them how they were supposed to be taken - are you saying £10K p/a or the transfer value/'cash in' value is £10K? If it's 10K p/a then this is basically 'gold plated' and guaranteed for life (or whatever terms the pension has). Even if the pension fund goes bust the Pension Protection fund will step in and continue paying most of it.
I would take every last penny of the 25% TFLS from the defined contribution pots. It's all tax free (up to £260K or there abouts), and you don't want Rachel from accounts to screw you over. Put as much as you can each year (currently £20K p/a) into ISA investments, again before Rachel from accounts moves those goal posts..
Draw down the remaining 75% of the DC pension pots to meet your income requirements, remembering that your DB is paying £10K p/a and the state pension will be £12.5K p/a. So you have about £23K p/a drawdown available before you hit the £50K 40% tax band.
The other 'trick' if you want to retire before your State pension age is to start taking £12.5K ish from your DB pots between ages 57 and 67. Then at 67 stop taking money from the DC because your SP will replace it.
There are other things you can do (TFLS recycling ::) , deferring your SP, etc), but these are quite advanced things that again an IFA can advise you about.
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From my research it's actually be advisable not to take the 25% - I'm in a simple world with just a single pension pot.
Huh? Why? It makes no difference when you take the 25% tax free. It's always tax free (well unless/until the chancellor changes the rules). I'm yet to hear a convincing reason NOT to take the full 25% TFLS from defined contribution pots.
The argument is different for defined benefit (aka DB/Final Salary) pots, because you usually have to commute some of the annual income in exchange for a lump sum. In those instances you have to work out the commutation rate. Would you prefer £10K p/a for life or £8K p/a for life and a £25K lump sum?
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This 25%, which comes to £10k in this example, could I take that all from 1 pension pot, leaving the others untouched? Or does it have to be 25% from each pot? I ask, because its very beneficial to not take 25% from my DB one.
Sorry, missed this bit.
I think legally you could take the combined TFLS from one pension pot, but practically, it's highly unlikely the 4 different pension providers will support/allow it. What you can do is transfer the 3 separate DC pots into one (making a single £30K pot) and then take any amount (0%-25%) of that pot as TFLS. Not sure what is gained by doing this though. Transferring the DB pot is trickier and riskier.
You need to be careful with the DB pot in particular, because there are different rules for DB pots. I'm assuming you're referring to the commutation rate on the DB pot not being particularly good? I don't have any DB pots, and it's a while since I've been in forums where such things are discussed. But, IIRC, 'good' commutation rates were generally considered to be 15 or greater - so £15K lump sum for every £1K of annual income given up. Anything less than 10 was usually considered a bad deal, and you were better off taking the annual income rather than the TFLS. However, it does all depend on your personal position, how long you expect to live, etc.
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I'm now at an age where mine is moving away from risk into lower returns. I guess a sensible move, as a big hit now might not have time to recover before I want to retire.
One thing worth adding is that workplace pensions do this on the assumption that you will want to be drawing from your pot on day 1 of your retirement, whenever that's defined to start. Depending on your appetite for risk, what other schemes you have, whether you'll be retiring in a big bang or dropping a few days a week for a while and so on, you might want to keep some of your investment at a higher risk until later or spread it around in other ways.
I'd certainly second the advice to get a good IFA, especially if you're putting away a big chunk of income. I should have done it earlier in life rather than leave funds to the default investment strategies of various workplace pensions.
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I'm now at an age where mine is moving away from risk into lower returns. I guess a sensible move, as a big hit now might not have time to recover before I want to retire.
One thing worth adding is that workplace pensions do this on the assumption that you will want to be drawing from your pot on day 1 of your retirement, whenever that's defined to start. Depending on your appetite for risk, what other schemes you have, whether you'll be retiring in a big bang or dropping a few days a week for a while and so on, you might want to keep some of your investment at a higher risk until later or spread it around in other ways.
Yes, I agree with that. You might be retired for 30+ years, and you probably shouldn't have everything in low risk/low return investments (or worse cash) for 30+ years.
One strategy is to keep (about) 5 years worth of income in low risk/low return investments, and the remainder in your normal higher risk portfolio. Then 'on average' once per year transfer one years worth of normal-risk into low-risk stuff. That way if there is a big drop in your normal-risk portfolio (due for instance to a stock market crash, or Trump/Truss going on another bender), you can wait a year or three for your portfolio to recover, and then transfer a year or threes worth of normal-risk to low-risk. This way you've got 5 year buffer, and aren't forced to cash-in when the stock market is low, and you can keep a large proportion of your pension invested in stuff that can/might return 5-10% p/a.
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Tbh, I can see quite a few ordinary working people reaching the point where they think " If you cant beat them join them".
If I was a lot younger I might be tempted myself.
Why work hard all your life to have half your money taken away and given to those who dont want to bother ?
We can only hope that the pendulum will swing back the other way, and theres signs of it happening.
The frightening thing is that it has swung so far off the scale in one direction that you have to wonder how far it might swing back in the opposite direction.
But if it doesnt swing back, the country is finished.
Those who disagree with the way the current government are going are labelled as right wing thugs, I believe.
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Any experts here? I have a Q?
Pension advice is a regulated area, and legally advice can only be given by those qualified to give it. No professional advisor is going to stick their neck out and give you (or anyone) advice on t'interweb without reviewing your current situation, future ambitions, appetite for risk yada yada, because they would end up being be fined millions by the FCA. That's why I keep saying that if you're asking these sort of questions then you really should go and see a good IFA - you get regulated advice with the backup that if the advisor screws up you can sue for mis-advice.
That said, what I would do is....
I would leave any defined benefit pensions be, and take them how they were supposed to be taken - are you saying £10K p/a or the transfer value/'cash in' value is £10K? If it's 10K p/a then this is basically 'gold plated' and guaranteed for life (or whatever terms the pension has). Even if the pension fund goes bust the Pension Protection fund will step in and continue paying most of it.
I would take every last penny of the 25% TFLS from the defined contribution pots. It's all tax free (up to £260K or there abouts), and you don't want Rachel from accounts to screw you over. Put as much as you can each year (currently £20K p/a) into ISA investments, again before Rachel from accounts moves those goal posts..
Draw down the remaining 75% of the DC pension pots to meet your income requirements, remembering that your DB is paying £10K p/a and the state pension will be £12.5K p/a. So you have about £23K p/a drawdown available before you hit the £50K 40% tax band.
The other 'trick' if you want to retire before your State pension age is to start taking £12.5K ish from your DB pots between ages 57 and 67. Then at 67 stop taking money from the DC because your SP will replace it.
There are other things you can do (TFLS recycling ::) , deferring your SP, etc), but these are quite advanced things that again an IFA can advise you about.
The figures were totally made up as were the number of pots, but yes, that is more or less what I'm doing.
I probably will retire long before SP age. I'm sick of working in this place ;D
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I think legally you could take the combined TFLS from one pension pot, but practically, it's highly unlikely the 4 different pension providers will support/allow it. What you can do is transfer the 3 separate DC pots into one (making a single £30K pot) and then take any amount (0%-25%) of that pot as TFLS. Not sure what is gained by doing this though. Transferring the DB pot is trickier and riskier.
The DB pot can't really move. Well, it can, obviously, but would be dumb to do so. Also were it is has additional protections beyond the standard protection should the company go tits up.
So technically, with the example above with the total value of DB being £10k (not P/A, remember this is a made up figure), and 3 DC's at £10k value each, I can take £10k (25% of all pensions) TFLS from ONE pot, but the logistics of doing so will be a problem?
By the time I retire, rules could well have changed so will need proper advice then, but musing around options at the moment. It would be nice to stay long enough that my DB starts in a few short years, but I don't think I can bite my lip that long, lol.
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As an aside, I'm convinced my current calculations are wrong. Every pension planner says I need £xyz p/a income for a comfortable lifestyle. I consider my current lifestyle to be comfortable - I'm soon off on my 3rd foreign holiday in a villa this year, so can't be grumbling.
So how come my current (heavily played about with via salary sacrifice schemes, so see how little I can live on*) income be very significantly lower than what the pension providers' calculators say, and I still feel comfortable?
I'm convinced I've missed something very fundamental ;D
*Done it this way, as we all know you spend what is left in your account ;D
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Im 66 in a couple of months although intend to keep working until Im 70.
I will have to seriously delve into all this stuff in the not too distant future.
Seems there are potential advantages / disadvantages to various options so Im thinking of hedging my bets and picking different options for my two private / workplace pensions and my / swmbos state pensions.
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Im 66 in a couple of months although intend to keep working until Im 70.
I will have to seriously delve into all this stuff in the not too distant future.
Seems there are potential advantages / disadvantages to various options so Im thinking of hedging my bets and picking different options for my two private / workplace pensions and my / swmbos state pensions.
Bet it all with an each way bet on the favourite at the 2.30 at Kempton Park? >:D
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Then blow the winnings on hookers, hard liquor & coke. :y ;D
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Then blow the winnings on hookers, hard liquor & coke. :y ;D
You'd last a fickin day....if that....you stupid old bastard ;D
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Then blow the winnings on hookers, hard liquor & coke. :y ;D
You'd last a fickin day....if that....you stupid old bastard ;D
Yes I was think more along the lines of a Nissan Micra runabout and a week in Clacton every summer! ;D
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I think legally you could take the combined TFLS from one pension pot, but practically, it's highly unlikely the 4 different pension providers will support/allow it. What you can do is transfer the 3 separate DC pots into one (making a single £30K pot) and then take any amount (0%-25%) of that pot as TFLS. Not sure what is gained by doing this though. Transferring the DB pot is trickier and riskier.
The DB pot can't really move. Well, it can, obviously, but would be dumb to do so. Also were it is has additional protections beyond the standard protection should the company go tits up.
DB pensions, especially those with enhanced features, will almost certainly need an IFA to sign off on any transfer. The receiving scheme will almost certainly refuse to accept the transfer without an IFA's approval. There are (or at least were) only a few schemes that would take it anyway - the risk of being sued by a disgruntled customer who later finds out the transfer was a very bad idea (and it usually is a very bad idea) is too great.
So technically, with the example above with the total value of DB being £10k (not P/A, remember this is a made up figure), and 3 DC's at £10k value each, I can take £10k (25% of all pensions) TFLS from ONE pot, but the logistics of doing so will be a problem?
By the time I retire, rules could well have changed so will need proper advice then, but musing around options at the moment. It would be nice to stay long enough that my DB starts in a few short years, but I don't think I can bite my lip that long, lol.
I don't think anyone will let you take the TFLS part of the DB from a different DC pot. It's commute some of the DB annual payment for a TFLS, or don't commute and no TFLS. Basically, the DB isn't really a pot of money - it's a promise to pay you £X till you die, so it probably doesn't have a real pot of money allocated to you for anyone to know how much a 25% of it is. Actuaries can work out how much cash a company has to put into the 'pot' to pay your £X forever, but that value can vary massively day to day, week to week. YOu only 'own' the promise to pay £X.
So, I think you could take £7.5K from the 3 DC pots, and legally I think you could take it all from any one of them - assuming the provider allows it which is doubtful. But any extra from the DB would have to come out of the DB by commutation.
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As an aside, I'm convinced my current calculations are wrong. Every pension planner says I need £xyz p/a income for a comfortable lifestyle. I consider my current lifestyle to be comfortable - I'm soon off on my 3rd foreign holiday in a villa this year, so can't be grumbling.
So how come my current (heavily played about with via salary sacrifice schemes, so see how little I can live on*) income be very significantly lower than what the pension providers' calculators say, and I still feel comfortable?
I'm convinced I've missed something very fundamental ;D
*Done it this way, as we all know you spend what is left in your account ;D
The illustrations given by pension companies assume all sorts of stuff that may or may not be relevant to you. The rules are set by the FCA, and mean that every company should give their illustration in a way that can be compared to others, so it's not the pension co's fault. This usually results in very low estimates based on low returns, such as annuities. An annuity provider must pay out even if you live to be 150, but the FCA assumptions are for a negative rate of return after inflation on you pot, and this means you need a big pot to sustain a small payout.
Annuities do have a place for those with no appetite for risk - you are basically paying the provider for a guaranteed income, so the risk is all theirs. However, if you are comfortable with some risk yourself then you can (probably!) achieve a better outcome by using one of the more recently introduced pension freedoms like drawdown. But, if you stuff it up then you could end up penniless in your old age - which is another reason to get an IFA involved particularly if the pots are large.
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Then blow the winnings on hookers, hard liquor & coke. :y ;D
You'd last a fickin day....if that....you stupid old bastard ;D
Yeah, but what a day. ;D
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Actuaries can work out how much cash a company has to put into the 'pot' to pay your £X forever, but that value can vary massively day to day, week to week. YOu only 'own' the promise to pay £X.
I had a feeling I'd seen a "total value" type number on it somewhere, but can't see it now. It does have a 25% TFLS figure on it though.
But, yes, you've confirmed that it isn't really going to happen. Obviously at the time, I'll still ask the IFA, but will plan for not taking the 25% from that pension.
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The illustrations given by pension companies assume all sorts of stuff that may or may not be relevant to you. The rules are set by the FCA, and mean that every company should give their illustration in a way that can be compared to others, so it's not the pension co's fault. This usually results in very low estimates based on low returns, such as annuities. An annuity provider must pay out even if you live to be 150, but the FCA assumptions are for a negative rate of return after inflation on you pot, and this means you need a big pot to sustain a small payout.
I was thinking along the lines of the "your need £40k pa for a comfortable lifestyle" type calculations, rather than the 4/6/8% growth figures on a pension pot.
Reality is, I've set my current income hitting my account to what my (index linked) DB would pay today + what a SP would pay today, and find I can live reasonably comfortable on that, and they a guaranteed income for life. Thus I have to self fund income until I can take my DB at 60 (penalties are a tad high for taking early) and my SP at 67/68. One of my DC's would easily cover that even with pessimistic growth, leaving my other DC for rainy day and big ticket items. Clearly the longer I work, the less I have to dip into that 1st DC.
But I can't help feeling I'm missed something ;D
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The illustrations given by pension companies assume all sorts of stuff that may or may not be relevant to you. The rules are set by the FCA, and mean that every company should give their illustration in a way that can be compared to others, so it's not the pension co's fault. This usually results in very low estimates based on low returns, such as annuities. An annuity provider must pay out even if you live to be 150, but the FCA assumptions are for a negative rate of return after inflation on you pot, and this means you need a big pot to sustain a small payout.
I was thinking along the lines of the "your need £40k pa for a comfortable lifestyle" type calculations, rather than the 4/6/8% growth figures on a pension pot.
Reality is, I've set my current income hitting my account to what my (index linked) DB would pay today + what a SP would pay today, and find I can live reasonably comfortable on that, and they a guaranteed income for life. Thus I have to self fund income until I can take my DB at 60 (penalties are a tad high for taking early) and my SP at 67/68. One of my DC's would easily cover that even with pessimistic growth, leaving my other DC for rainy day and big ticket items. Clearly the longer I work, the less I have to dip into that 1st DC.
But I can't help feeling I'm missed something ;D
Ahh, I see. I'm not sure I'd trust those sort of predictors. I doubt they're truly representative, and the risk is that they're just there to 'scare' you into saving more for your retirement.
Only you really know what you'll need to live on in retirement. Some costs will go down - travelling to/from work, associated car maintenance etc. Other costs go up - as you age you will typically use more energy to keep your home warmer, and since you'll be home more often and for longer, the heating and leccy bills are likely to be more. Travel insurance gets more expensive for those month long world cruises to Austraila and back. I'm sure some of the old bu99ers on here can give you an idea of other things that get expensive.
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The illustrations given by pension companies assume all sorts of stuff that may or may not be relevant to you. The rules are set by the FCA, and mean that every company should give their illustration in a way that can be compared to others, so it's not the pension co's fault. This usually results in very low estimates based on low returns, such as annuities. An annuity provider must pay out even if you live to be 150, but the FCA assumptions are for a negative rate of return after inflation on you pot, and this means you need a big pot to sustain a small payout.
I was thinking along the lines of the "your need £40k pa for a comfortable lifestyle" type calculations, rather than the 4/6/8% growth figures on a pension pot.
Reality is, I've set my current income hitting my account to what my (index linked) DB would pay today + what a SP would pay today, and find I can live reasonably comfortable on that, and they a guaranteed income for life. Thus I have to self fund income until I can take my DB at 60 (penalties are a tad high for taking early) and my SP at 67/68. One of my DC's would easily cover that even with pessimistic growth, leaving my other DC for rainy day and big ticket items. Clearly the longer I work, the less I have to dip into that 1st DC.
But I can't help feeling I'm missed something ;D
Ahh, I see. I'm not sure I'd trust those sort of predictors. I doubt they're truly representative, and the risk is that they're just there to 'scare' you into saving more for your retirement.
Only you really know what you'll need to live on in retirement. Some costs will go down - travelling to/from work, associated car maintenance etc. Other costs go up - as you age you will typically use more energy to keep your home warmer, and since you'll be home more often and for longer, the heating and leccy bills are likely to be more. Travel insurance gets more expensive for those month long world cruises to Austraila and back. I'm sure some of the old bu99ers on here can give you an idea of other things that get expensive.
Are Werthers Originals expensive? ??? :-\ ;D
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From my research it's actually be advisable not to take the 25% - I'm in a simple world with just a single pension pot.
Huh? Why? It makes no difference when you take the 25% tax free. It's always tax free (well unless/until the chancellor changes the rules). I'm yet to hear a convincing reason NOT to take the full 25% TFLS from defined contribution pots.
The argument is different for defined benefit (aka DB/Final Salary) pots, because you usually have to commute some of the annual income in exchange for a lump sum. In those instances you have to work out the commutation rate. Would you prefer £10K p/a for life or £8K p/a for life and a £25K lump sum?
What I've read is that 25% is for the life of your pension, you don't need to take it in one go.
40% threshold is ~£50k
So pay yourself ~£49k from your pension pots (paying ~20% tax)
Then top up your income from your 25% tax free lump sump, say £15k over the course of the year.
So you get a £65k pension and only pay 20% tax.
You only ever pay 20% tax and over the course of your entire pension that would save far more.
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I don't think anything will be tax free for much longer. :-\
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I don't think anything will be tax free for much longer. :-\
Exactly, so far you can put £60k a year in tax free plus previous 3 years un-used entitlement, can see that being taken away. :(
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From my research it's actually be advisable not to take the 25% - I'm in a simple world with just a single pension pot.
Huh? Why? It makes no difference when you take the 25% tax free. It's always tax free (well unless/until the chancellor changes the rules). I'm yet to hear a convincing reason NOT to take the full 25% TFLS from defined contribution pots.
The argument is different for defined benefit (aka DB/Final Salary) pots, because you usually have to commute some of the annual income in exchange for a lump sum. In those instances you have to work out the commutation rate. Would you prefer £10K p/a for life or £8K p/a for life and a £25K lump sum?
What I've read is that 25% is for the life of your pension, you don't need to take it in one go.
40% threshold is ~£50k
So pay yourself ~£49k from your pension pots (paying ~20% tax)
Then top up your income from your 25% tax free lump sump, say £15k over the course of the year.
So you get a £65k pension and only pay 20% tax.
You only ever pay 20% tax and over the course of your entire pension that would save far more.
It all depends on what are called 'crystallisation' events.
Say you have a £1M pot. You can.....
1) Crystallise £50K, and take 25% tax free, and then take the remaining 75% as 'income' an pay tax at 20/40/45%. You leave the remaining £950K inside the uncrystallised pension wrapper.
2) Crystallise £50K, and take 25% tax free, and leave the 75% inside the pension as 'crystallized' funds. You leave the remaining £950K inside the uncrystallised pension wrapper.
3) Crystallise all £1M, and take 25% tax free, and leave the 75% inside the pension as 'crystallized' funds.
What you cannot do is crystallise £50K, but take 25% TFLS of the whole £1M pot. You can only take 25% of whatever you crystallise. Once it's crystallised, you can't take any further TFLS from the crystallised portion of the pot.
On the tax point, if you crystallise (approx) £66K, then the TFLS part of that will be £16K5, leaving £50K exposed to income tax. You have a £12.5K personal allowance, so will pay 20% on £37K5, which is £7.5K. Therefore, you will receive £58K5 into your bank account, and pay £7.5K tax - an effective tax rate of 12.8%.