Pension Advice

[voicey]

Are there any IFA's on here that would be willing to help with some pension advice for my mother (paid for of course)? She is at retirement age and has a small money purchase pension (alongside a DB pension) and could do with some advice on what to do.

[curley]

I am surprised MR Umbongo hasn't replied to this yet !

[Nigel_O]

Please define "small" for the money purchase scheme

Pots under £10k can be taken in their entirety under the new triviality rules

She could take 25% tax-free cash and then choose what to do with the rest - annuity or drawdown (latter unlikely if the value is small)

She could take the whole lot, defer her State pension (which has a decent return)

Does she have any health issues or medical conditions? Does she smoke? Lots of lifestyle aspects can qualify her for an enhanced or even impaired annuity, which would give a significantly higher return than a standard annuity

PS - I'm not an IFA, although I was for several years, then went into paraplanning and now managing a restricted adviser practice

[sugerbear]

Nigel_O said:

Please define "small" for the money purchase scheme

Pots under £10k can be taken in their entirety under the new triviality rules

She could take 25% tax-free cash and then choose what to do with the rest - annuity or drawdown (latter unlikely if the value is small)

She could take the whole lot, defer her State pension (which has a decent return)

Does she have any health issues or medical conditions? Does she smoke? Lots of lifestyle aspects can qualify her for an enhanced or even impaired annuity, which would give a significantly higher return than a standard annuity

PS - I'm not an IFA, although I was for several years, then went into paraplanning and now managing a restricted adviser practice

To the best of my knowledge (and I am not a FA) the trivility rules now apply to anything under 30k, not 10k. I know because i have been assisting a relative with their pension.

the first hit I found on google confirms http://www.thisismoney.co.uk/money/experts/article...

[voicey]

Thanks for the replies - the pot is £40k. There seems to be quite a few options for her which is why I'm keen to get the advice of an IFA. Happy to pay for their time...

[sugerbear]

It's what my relative did, cost was around £1000 for the advice which ultimately came out of pension pot. I did look at setting up a hargreaves Lansdown Sipp which was low cost and seemed relatively easy to do. But I felt that if anything did go wrong it would end up back on my doorstep.

She chose to to move it to a better home (a sipp with standard life that she could drawdown).

everyone is different so worth getting an IFA to give you some options.

[Ozzie Osmond]

voicey said:

Thanks for the replies - the pot is £40k. There seems to be quite a few options for her which is why I'm keen to get the advice of an IFA. Happy to pay for their time...

What does she WANT to do?

Personally I wouldn't pay an IFA £1,000 to give run-of-the-mill advice on a £40k pot.

Assuming she's in good health and not already over, say, 70 years old her choices will boil down to,

• Leave it all in and draw a small pension. I'm guessing c.£1,500 a year
• Take £10,000 as a tax free cash lump sum and leave the rest in for pension, so c.£1,100 a year. She could use the cash to pay down mortgage/debts, splash on a world cruise or perhaps invest in an ISA.
• Draw out the whole lot as tax efficiently as possible and spend/invest as she sees fit. Again ISAs are worth a look.

So back to where we started, what does she WANT to do? £1,500 a year might not sound a lot but it's a useful addition to the state pension.

By the way, you can go to an online annuity calculator (such as Hargreaves Lansdown) to see how much pension she can buy for £40k. Again, avoids paying an EyeFA to do SweetFA,

http://www.hl.co.uk/pensions/annuities

[Nigel_O]

sugerbear said:

To the best of my knowledge (and I am not a FA) the trivility rules now apply to anything under 30k, not 10k. I know because i have been assisting a relative with their pension.

the first hit I found on google confirms http://www.thisismoney.co.uk/money/experts/article...

The article you linked to is out of date - rules changed in April 2015 - the limit is now £10k from a single pension pot, with trivial commutation allowed on up to three pots.

Academic now, as OP has confirmed £40k

An indication of the various amounts available - all assuming she takes £10k tax-free cash and uses £30k to buy an annuity

Best level annuity - circa £1400pa
Best level enhanced annuity - circa £1800pa (these are underwritten, so the actual rate depends on the annuitant's particular health status)
Best increasing annuity - circa £825pa (increasing @ RPI)

Some providers may allow a drawdown contract, where the £30k remaining after the tax-free cash remains invested and is withdrawn at whatever rate the owner requires (up to 100% of the fund) - taxed at marginal rate. The key here is to balance the income taken, with the growth expected and the expected lifespan, otherwise its easy to deplete the fund.