Pension on death
Discussion
What advice would people give to a friend in the following situation.
Recently widowed and is beneficiary to a smallish DC pension pot from partner. Pension is tax free due to age of partner.
Total is less than £100k
Eligible for state pension in under 2 years and is currently earning an amount less than budget required to live. Investigating whether eligible for full state pension. No private pension in own name.
Partner was contributing around £1k per month to household.
No mortgage - there is the possibility of a downsize at some stage but will not release more than £100k equity.
Will also be receiving state bereavement allowance (£2100 lump and £100 p.w. for 18 months).
The key question is the mechanics around accepting the personal pension.
My view tends towards the money being too critical to leave invested in equities while drawing income, and that leaving in high (?) interest account or national savings while arranging a monthly deposit to current account.
Does anyone disagree and feel that there are defensive investments suitable for such a smallish amount and timescale?
I'm also thinking that the cost of professional advice would outweigh any benefits.
Any other relevant thoughts welcome.
Thanks in advance.
Separate login created for this question for privacy.
As you are no doubt aware, cash is ok in the short-term but I presume she could live for 20 or 30 more years and would need the DC pension to provide her with an income over that time. Investigating what state pension she will get is a good idea and especially if there is any option available to top this up. Voluntary NI contributions to gain extra state pension are probably the only low risk investment available that keeps up with inflation. The availability and cost of voluntary NI contributions tends to change at the end of financial years, so best to progress this quickly - you can do it online. Also voluntary class C NI contributions are good value c. £750 for £266 a year extra pension.
Edited to add: there may well be minimum years of contribution to get a state pension, plus also what benefits she'd get in the absence of a state pension and other factors to consider before making voluntary contributions. Somebody like PensionWise, or whatever it is now called, may be able to provide some free guidance.
Edited to add: there may well be minimum years of contribution to get a state pension, plus also what benefits she'd get in the absence of a state pension and other factors to consider before making voluntary contributions. Somebody like PensionWise, or whatever it is now called, may be able to provide some free guidance.
Edited by trevalvole on Monday 10th January 13:30
State pension is the first thing check and sounds like you are already on the case. That is likely to be the best thing to top up if needed.
For the rest, then some sort of bucketing is likely the best approach - what';s needed in the next 1-2 years in cash, the next 3-5 years in something low risk but at least keeping close to inflation. The stuff for 7 years or longer in equities. Then every year do a rebalance - if equity markets are down, then don't touch that bucket, but continue to drain the others. When the equity markets come back, then refill the other buckets.
Sequence of returns risk is the term to google
For the rest, then some sort of bucketing is likely the best approach - what';s needed in the next 1-2 years in cash, the next 3-5 years in something low risk but at least keeping close to inflation. The stuff for 7 years or longer in equities. Then every year do a rebalance - if equity markets are down, then don't touch that bucket, but continue to drain the others. When the equity markets come back, then refill the other buckets.
Sequence of returns risk is the term to google
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