Annuity Pensions

[andy222]

Ok guys, I don't know if you know about these?
I have had a small annuity pension for a few years now.

1. Are they worth it?
2. Should I get the cash and put it into another account?

To tell the truth, I don't know anything about these, but I was advised at the time that this was the way to go.

[Harry T]

Hi Andy, you are in the same boat as me. I have three choices:

1. Wait a few more years until I actually retire

2. Take up to 25% Tax free, but if i do that I have to start taking my pension now

3. Take 100% as a Lump sum 25% Tax Free.

May I suggest you contact a Company called "Just Retirement" who will give you a personal illustration of whatever you request. There is also a Guaranteed Term for your Pension to be paid for up to 10 Years so, if you die, then your Pension will be paid to whoever you wish for the Selected Term up to 10 years. And then there is an Enhanced Option whereby, if you have some medical condition, your Pension may be valued at £2,500 per year without the medical condition. But with the medical condition, it would be worth an enhanced £3.000 per year. This Company will give you an illustration for whatever you request.

Basically mate, from April it's entirely up to you, it's your money and you decide what you want to do with it. My one concern is, if I take mine as a Lump Sum, how will it affect my pension in years to come i.e., will I still get my full State Pension? Bearing in mind, I may be in the Philippines.

It really comes down to what's the value of the Annuity. If it's only small and worth approximately £1,000 per year pension, then I suggest it's better to take the lump sum of probably £10,000+ which may help with more immediate needs.

A final thing. If you are already drawing a Pension, then so far as I am aware, then it's too late - the decision has been made and cannot at the present time be reversed.

I hope this is some help for you, and maybe others on the forum.

[andy222]

Cheers, Harry. Like you mate, I will also be in the Philippines when I retire. It is a bit of a headache as I know I will lose out one way or another. I lost £40,000 in one Pension Scheme and decided to put the other into an annuity.

[Terpe]

Andy, won't you get an NHS pension ?

Wouldn't the best option be to add any spare cash to that ?

The current NHS pension is still one of the very best schems around

[andy222]

No Peter, I have only worked for the NHS for 5 years. I did look into their Pension Scheme, but it would come under the new Pension Rules and would not be worth it.

The one I'm talking about was from my engineering days. I had two pensions running at that time and - like I said - I lost £40,000 on the one, decided to freeze the other, and on advice, got this annuity pension. Thanks for your interest. :xxgrinning--00xx3:.

Like Harry mentioned, I think this would affect my State pension if I don't do something about it. Unfortunately it's not enough to open a Swiss Bank Account. :biggrin:

[stevewool]

Wait till this April - lots of changes going to happen then - there will be lots out there after your money. That's what I am going to do

[Terpe]

.....Like Harry said, I think this would affect my State Pension if I don't do something about it. Unfortunately its not enough to open a Swiss Bank Account. :biggrin:

How would it affect your State Pension ?
That's based on NI contribution years.

The State Pension contribution years for eligibility will be changing soon.

[KeithD]

Am I glad I get a War Pension, I don't have to worry about any of this stuff.

[andy222]

How would it affect your State Pension ?
That's based on NI contribution years.

The State Pension contribution years for eligibility will be changing soon.

At this point in time Terpe, I don't think it does affect the State Pension. But what is in store for us?

[Rosie1958]

I watched a very good television programme on Channel 4 Despatches a couple of weeks ago about the Pension Reform and how so many people are sitting on Annuities that aren't performing and will remain on them oblivious to the fact they they will have choices.

It was very concerning hearing that some ill-informed people were just going to cash in their pension and blow it all on a new kitchen and holidays abroad until it was gone! Another person was also interviewed claiming how hard it was to live on the breadline with the Pensions Credit he was receiving since he failed to make proper provision for his retirement.

Hopefully there will be more on this subject in tv documentaries but for anyone in doubt, chatting to an independent financial adviser could be of some help. :xxgrinning--00xx3:

[Harry T]

I have recently received a couple of Personal Illustrations for my small Pension Pot of just in excess of 40k.

1. I chose to take a 25% tax free lump sum.
2. I asked for a enhanced (Medical Conditions) Illustration.
3. With a 10 year (Maximum allowed) guarantee period.

My Tax free lump sum would give me around 10k, and leave me with an annual (enhanced) annuity (Pension) of around £2000 per year or £40 per week. A UNenhanced Pension for me is only around £1500 per year or £30 per week.

I calculate that I need to live 15 years before I get all the money I have invested - approximately 30k - which will mean I need to live until I am 78, and then the Pension Company will need to pay my annuity (Pension) out of their funds.

Of course, I could choose not to take ANY lump sum, which would then mean I would need to live another 5 years till I am 83 before I see MY 40k investment end, and the Pension Company then use their funds to pay my Pension.

Now we need to keep in mind from April 2015, I can withdraw ALL of my Pension pot; 25% Tax free leaving me with 30k Taxable which would leave me with a Total Cash pot of approximately 24k plus my lump sum = 34k. So if I use my Cash pot as a Pension of 2k per year, I would need to live until I am 80 before it's used up, but if I get a life-threatening illness before those 17 years, I can use the Cash pot as I want, and NOT have the Pension Company benefit from it for their profits.

Now as I see it, put in simple terms, the bigger your Cash Pot, the longer you need to live before you get your investment back, and the choice comes down to:

Do you want the Pension Company to be in control of YOUR money or do YOU want to regain control of YOUR money. For me - who has had 2 previous serious illnesses - I think it's a No-brainer.

I would suggest everyone who has a Pension Pot contacts a Company name of http://www.justretirement.com/, who will give you an entirely free Personal Annuity Illustration. They are NOT Financial Advisers, this Illustration will go a long way to helping you decide what's best for you, as everyone's situation is different. :xxgrinning--00xx3:

[Terpe]

Good work Harry :xxgrinning--00xx3:
A very informative and easy to follow post.

[andy222]

Nice read Harry, but would your decisions affect your State Pension? :xxgrinning--00xx3:.

[Harry T]

Thanks Terpe, I was trying to put it in simple terms, not always easy to find the right words to do that, especially with something like Annuities/Pensions :doh.

Andy222: At the moment it would affect Pension Credit, which is means tested. Any Savings/Annuities over 10k are taken into account. State Pension I don't think would be affected unless there is a means test involved - in which case, it could have an affect on any Pension that needs to be topped up.

I myself - and others in the situation of being at, or near Pension age - would be best advised to wait until April, when new regulations are due to be announced. And hopefully, with an election around the corner, we will see more much needed Benefits for Pensioners - especially the level of the Pension itself - and Pension Credit, I have read somewhere, will not in future be means tested. Which may not seem much, but again for Annuity holders, it could have a big bearing on what decisions they choose to make. As an example, in my case it will mean I can get a Guaranteed Pension/Pension Credit without being means tested, so I can take my Lump sum, and get my Pension Credit without me needing to Top up any Pension I have from MY Lump sum.

Hopefully it's simple for people to understand and here is where to get YOUR Personal Illustration:

http://www.justretirement.com/ free of charge.

A final reminder, ANYONE who is over 55 can take up to 25% Tax Free out of their Pension Pot, so if you need some of YOUR money urgently this is a way of doing it.

[andy222]

Where we are going, we won't get Pension Credit. I think we will be penalised in the future for having a private pension and then it will affect the State Pension. Just my thoughts.

[stevewool]

well done Harry, this will help many:xxgrinning--00xx3: