pension - after death
Discussion
Just had in summary of my private pension - ive slowed down what Ive paid in 10 years ago but just trickling some in each month, anyway reading the anticipated benefits etc which are ok but one of the details is that "when you die your spouse will carry on receiving 50% of this income"
This pension starts at 55 so if I die at 56 then wife only gets half - some some rough calculations she would then need to live for another 35 years just to get back the straight money I (we) have paid in let alone the value of the fund which is almost double. So effectively she would need to live to 140 years to get back whats in there now at half rate.
Is this normal? I can't believe I would have signed up to this?
This pension starts at 55 so if I die at 56 then wife only gets half - some some rough calculations she would then need to live for another 35 years just to get back the straight money I (we) have paid in let alone the value of the fund which is almost double. So effectively she would need to live to 140 years to get back whats in there now at half rate.
Is this normal? I can't believe I would have signed up to this?
superlightr said:
Just had in summary of my private pension - ive slowed down what Ive paid in 10 years ago but just trickling some in each month, anyway reading the anticipated benefits etc which are ok but one of the details is that "when you die your spouse will carry on receiving 50% of this income"
This pension starts at 55 so if I die at 56 then wife only gets half - some some rough calculations she would then need to live for another 35 years just to get back the straight money I (we) have paid in let alone the value of the fund which is almost double. So effectively she would need to live to 140 years to get back whats in there now at half rate.
Is this normal? I can't believe I would have signed up to this?
What happens if you live until 100, where do you think the money comes from in that scenario? For how long would you expect the pension to be paid?This pension starts at 55 so if I die at 56 then wife only gets half - some some rough calculations she would then need to live for another 35 years just to get back the straight money I (we) have paid in let alone the value of the fund which is almost double. So effectively she would need to live to 140 years to get back whats in there now at half rate.
Is this normal? I can't believe I would have signed up to this?
Normally there would be a guarantee period, so the full pension would be paid for at least (say) 5 years.
Those that live shorter than expected subsidise those that live longer than expected. Have you taken into account that the pension might be increased with inflation? Have you taken into account the impact of any tax free cash you might choose to take?
Remember, you don't have to take an annuity if you don't want to, and even if you do, you are able to shop around to find the best possible annuity rate.
Edited by sidicks on Saturday 14th July 09:04
perhaps to clarify - I would have thought the wife would have received 100% of the benefit at least until the funds in had been "used up" ie up to their value.
Real figures.
The total I have contributed is £70330 todate
Total value of fund is £133545 now.
retirement age is 55 (im 48 now)
The estimated pension is £2540 a year in todays money. So 7 years its not going to change much.
So that's 7 years away for me.
If I die at 60 that would be about £12700 paid out to me
If wife then gets half that's £1270 a year
just on a straight whats in the fund £133545 less £12700 paid to me = £120845 left in the fund
which if then paid out to wife would mean she has to live 95 years just to get the value of that fund.
If work on a straight what Ive paid in £70330 less £12700 = £57630 wife would need to live 45 more years just to get out what we put in with no govt contribution.
have I screwed up on my thoughts process on this?
If I die at 80 that's 25 years x 2540 = £63500 so close enough to what Ive actually paid in of £70k but still no where near the fund value of £133545
and if wife then gets half then it would take her a further 55 years to get the fund value out ie she would be 125 ish years old ( we are both same age)
Real figures.
The total I have contributed is £70330 todate
Total value of fund is £133545 now.
retirement age is 55 (im 48 now)
The estimated pension is £2540 a year in todays money. So 7 years its not going to change much.
So that's 7 years away for me.
If I die at 60 that would be about £12700 paid out to me
If wife then gets half that's £1270 a year
just on a straight whats in the fund £133545 less £12700 paid to me = £120845 left in the fund
which if then paid out to wife would mean she has to live 95 years just to get the value of that fund.
If work on a straight what Ive paid in £70330 less £12700 = £57630 wife would need to live 45 more years just to get out what we put in with no govt contribution.
have I screwed up on my thoughts process on this?
If I die at 80 that's 25 years x 2540 = £63500 so close enough to what Ive actually paid in of £70k but still no where near the fund value of £133545
and if wife then gets half then it would take her a further 55 years to get the fund value out ie she would be 125 ish years old ( we are both same age)
Edited by superlightr on Saturday 14th July 09:26
superlightr said:
perhaps to clarify - I would have thought the wife would have received 100% of the benefit at least until the funds in had been "used up" ie up to their value.
Real figures.
The total I have contributed is £70330
Total value of fund is £133545
retirement age is 55
The estimated pension is £2540 a year in todays money.
So the pension is increasing with RPI, have you factored that into your calculations?Real figures.
The total I have contributed is £70330
Total value of fund is £133545
retirement age is 55
The estimated pension is £2540 a year in todays money.
Does the projection assume that no tax free cash is taken?
superlightr said:
So that's 7 years away for me.
If I die at 60 that would be about £12700 paid out to me
Plus inflation.If I die at 60 that would be about £12700 paid out to me
superlightr said:
If wife then gets half that's £1270 a year
Plus inflation.superlightr said:
just on a straight whast in the fund £133545 less £12700 paid to me = £120845 in the fund
Ignoring inflation.superlightr said:
which if then paid out to wife would mean she has to live 95 years just to get the value of the fund.
If work on a straight what Ive paid in £70330 less £12700 = £57630 wife would need to live 45 more years just to get out what we put in with no govt contribution.
Ignoring inflation.If work on a straight what Ive paid in £70330 less £12700 = £57630 wife would need to live 45 more years just to get out what we put in with no govt contribution.
superlightr said:
have I screwed up on my thoughts process on this?
If I die at 80 that's 25 years x 2540 = £63500 so close enough to what Ive actually paid in of £70k but still no where near the fund value of £133545
Ignoring inflation.If I die at 80 that's 25 years x 2540 = £63500 so close enough to what Ive actually paid in of £70k but still no where near the fund value of £133545
How long do you expect to live?
superlightr said:
and if wife then gets half then it would take her a further 55 years to get the fund value out ie she would be 125 ish years old ( we are both same age)
Ignoring inflation.As already explained above, an annuity provides you a guaranteed income for life.
For how long would you expect to receive the pension?
Edited by sidicks on Saturday 14th July 09:33
sidicks said:
[
For how long would you expect to receive the pension?
Appreciate your replies. superlightr said:
have I screwed up on my thoughts process on this?
If I die at 80 that's 25 years x 2540 = £63500 so close enough to what Ive actually paid in of £70k but still no where near the fund value of £133545
and if wife then gets half then it would take her a further 55 years to get the fund value out ie she would be 125 ish years old ( we are both same age)
As already explained above, an annuity provides you a guaranteed income for life.If I die at 80 that's 25 years x 2540 = £63500 so close enough to what Ive actually paid in of £70k but still no where near the fund value of £133545
and if wife then gets half then it would take her a further 55 years to get the fund value out ie she would be 125 ish years old ( we are both same age)
For how long would you expect to receive the pension?
Yes RPI inflation at 2.5% is calculated. So my cals will be off a little but the amounts are relatively small are they not?.
I would have thought the pension would have paid out at least until the actual fund has been used up for my wife but it wont.
I agree when the fund value has been used up there should be no pension benefit for the wife.
There is no guarantee period for the wife.
If I die at 100 then its about break even then sure wife should get £0
but if I die at 56 then wife wont even get close to what we paid in. let along the fund value. That's the rub. clearly my funds are hers as well as is mortgages etc.
superlightr said:
Appreciate your replies.
Happy to help.superlightr said:
Yes RPI inflation at 2.5% is calculated. So my cals will be off a little but the amounts are relatively small are they not?.
At age 60, an RPI-linked annuity will cost (roughly) twice as much as a flat annuity.superlightr said:
I would have thought the pension would have paid out at least until the actual fund has been used up for my wife but it won't.
Once you've purchased an annuity, there is no 'fund'.superlightr said:
I agree when the fund value has been used up there should be no pension benefit for the wife.
There is no guarantee period for the wife.
The guarantee period (if any) would apply from your retirement.There is no guarantee period for the wife.
superlightr said:
If I die at 100 then its about break even then sure wife should get £0
If you die at age 100 you will have made a massive profit. You simply can't ignore inflation.superlightr said:
but if I die at 56 then wife wont even get close to what we paid in. let along the fund value. That's the rub. clearly my funds are hers as well as is mortgages etc.
An annuity is the opposite of life insurance - you are effectively insuring yourself against living longer than expected - with life insurance, most people will pay premiums for years and years and never claim. Their premiums are used to pay the sum assured for the small numbers of people who do die.With annuities, most people will live to around the expected age - circa 25-30 years in retirement, depending on various factors. Some people will die early, they will subsidise those who live longer than expected.
As mentioned above, you do not have to take an annuity, you can use a drawdown product and use that to find your retirement. In that case, the investment risk and inflation risk and longevity risk is entirely yours:
If things go well, you can take higher income and / or there will be a fund left over for your wife when you die. If things go bad, you will run out of money before you die.
You could decide to lock in a lower amount of income (with an annuity) and then go into drawdown with the remainder, hoping to achieve a better overall outcome.
OP - the way you need to think about it is as follows:
If you live as long as expected, based on population mortality rates and your wife lives as long as expected, then you will receive back the amount of your initial fund plus the interest earned, less the insurer's profit margin.
If you live longer than expected, you'll get back more (and be subsidised by those who live shorter than expected).
If you live as long as expected, based on population mortality rates and your wife lives as long as expected, then you will receive back the amount of your initial fund plus the interest earned, less the insurer's profit margin.
If you live longer than expected, you'll get back more (and be subsidised by those who live shorter than expected).
superlightr said:
A drawdown
Would that be on the total fund value and a straight x per year?
Does that continue after my death until fund used up?
Drawdown:Would that be on the total fund value and a straight x per year?
Does that continue after my death until fund used up?
You can invest in what you like and take out what you like and if anything is left then it would be available to your wife. Of course if you live longer than expected or investment returns are bad, you could run out of money.
sidicks said:
As mentioned above, you do not have to take an annuity, you can use a drawdown product and use that to find your retirement. In that case, the investment risk and inflation risk and longevity risk is entirely yours:
If things go well, you can take higher income and / or there will be a fund left over for your wife when you die. If things go bad, you will run out of money before you die.
You could decide to lock in a lower amount of income (with an annuity) and then go into drawdown with the remainder, hoping to achieve a better overall outcome.
Again thank you to all posters.If things go well, you can take higher income and / or there will be a fund left over for your wife when you die. If things go bad, you will run out of money before you die.
You could decide to lock in a lower amount of income (with an annuity) and then go into drawdown with the remainder, hoping to achieve a better overall outcome.
I would be very happy to out live a draw down. It's a small amount as a pension annuity and don't anticipate lasting beyond 70 so a drawdown to that age would be fine.
I dont like the idea of paying in and not getiting out the base of whats was paid in. Im not worried of geting more out and dont expect to.
We have a number of rentals so bulk income is from those
sidicks said:
superlightr said:
A drawdown
Would that be on the total fund value and a straight x per year?
Does that continue after my death until fund used up?
Drawdown:Would that be on the total fund value and a straight x per year?
Does that continue after my death until fund used up?
You can invest in what you like and take out what you like and if anything is left then it would be available to your wife. Of course if you live longer than expected or investment returns are bad, you could run out of money.
superlightr said:
Again thank you to all posters.
I would be very happy to out live a draw down.
What happens if you run out of money?I would be very happy to out live a draw down.
superlightr said:
It's a small amount as a pension annuity and don't anticipate lasting beyond 70 so a drawdown to that age would be fine.
Why do you not anticipate living beyond 70, if population life expectancy is more like 85? If you have a genuine medical condition that would be expected to affect your mortality, then you can apply for an enhanced or impaired annuity, which would provide much higher income in recognition of your higher mortality.superlightr said:
I dont like the idea of paying in and not getiting out the base of whats was paid in. Im not worried of geting more out and dont expect to.
See above - most people would be 'expected' to take out the amount roughly the amount they out in, plus interest.superlightr said:
We have a number of rentals so bulk income is from those.??
If you have reliable other income, then guaranteed annuity income may not be the best option for you. Take note of the comments above regarding enhanced annuities though.superlightr said:
A drawdown
Would that be on the total fund value and a straight x per year?
Does that continue after my death until fund used up?
With an annuity you are locking into a guaranteed income for the rest of your life, and one for your widow if she survives you. Most annuities carry a 5 year guarantee, to the balance of 5 years pension is paid as a lump sum if you die within the first 5 years.Would that be on the total fund value and a straight x per year?
Does that continue after my death until fund used up?
With drawdown you can assess whatever funds are in the pension arrangement to provide pension income, and whatever remains on your death would be available to your widow (or whoever you have nominated to receive it.
Annuities provide a guaranteed income but no flexibility.
Drawdown provides flexibility but no guarantees.
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