Anyone know about increasing v uplifted pensions?

woof woof

woof woof

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Alan
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Just a quickie.

I've just received a private pension forecast and I'm just about financially clueless so I thought I'd ask a quick question...

I have the option of an increasing pension which may increase over the years or a higher uplifted pension which I gather is one which doesn't increase over the years.

Has anyone any idea which is the best or is it impossible to say in these strange times we're living in?
 
THIS ^^^

Not something that can be answered properly on a forum IMO. (as an ex financial consultant!)
 
:plus1::agree:

Get yourself an IFA and see what s/he can advise you. It is matter requiring expertise and guidance for you.

PS from your description it sounds like you only being offered an Annuity based pension...............and unless your pension is being saved with an unusual provider, you will find with an IFA's advice that other options are available to you!

PPS an IFA is an advisor who has no ties to any pension provider but note all IFA services are now and have been for time fee based.
 
Exactly see someone qualified that’s what I did and so glad I did got very good advice
 
Also see someone from the pension advice service they are government people and really helpful
 
Make sure that the advisor is reputable and fully qualified
Through work several years ago the 'advisors ' they brought in before they forced workplace pension on us, told me one of the pensions I had was not really worth much
When I reached 60 and it came into force turns out it was a final salary pension from the 80's , 500 per month.. !maybe that wasn't much to them
 
It depends on how long you live.
If you live to be 100 you'd likely get more out of the increasing pension.
There may be better options available other than an annuity based pension, so as has been said, best to get proper advice.
 
sounds to me what is being said is drawn down pension vs taking amounts out of your pot
drawn down is when they give you a calculation per year and thats it fixed, so you get £xx per year until you die.
however modern philosphy is simply keep you pot invested and keep it working and take what you need per year.
this keeps your pension working like a tin miner but can be subject to loss as it is an investment.

personally for me keep it invested and working (as i am planning and have been advised) and just take what you need.
 
Mr Bump said:
sounds to me what is being said is drawn down pension vs taking amounts out of your pot
drawn down is when they give you a calculation per year and thats it fixed, so you get £xx per year until you die.
however modern philosphy is simply keep you pot invested and keep it working and take what you need per year.
this keeps your pension working like a tin miner but can be subject to loss as it is an investment.

personally for me keep it invested and working (as i am planning and have been advised) and just take what you need.
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I don’t think that’s what’s being said at all. He is being offered an “annuity type” pension and has a choice of a pension increasing each year or a higher pension that doesn’t increase. Drawdown may well be an option if he has a DC pension.
His first port of call should be https://www.pensionsadvisoryservice.org.uk/ where he can get free advice to at least understand a little more.
A visit to an IFA (with a cost attached) may (or not) then be necessary.
 
Mr Bump said:
sounds to me what is being said is drawn down pension vs taking amounts out of your pot
drawn down is when they give you a calculation per year and thats it fixed, so you get £xx per year until you die.
however modern philosphy is simply keep you pot invested and keep it working and take what you need per year.
this keeps your pension working like a tin miner but can be subject to loss as it is an investment.

personally for me keep it invested and working (as i am planning and have been advised) and just take what you need.
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Craig1912 said:
I don’t think that’s what’s being said at all. He is being offered an “annuity type” pension and has a choice of a pension increasing each year or a higher pension that doesn’t increase. Drawdown may well be an option if he has a DC pension.
His first port of call should be https://www.pensionsadvisoryservice.org.uk/ where he can get free advice to at least understand a little more.
A visit to an IFA (with a cost attached) may (or not) then be necessary.
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Yup. That seems to be the case. The letter goes on to offer a healthy lump sum plus the same two options but obviously with lower payments.

Thanks for the link. I'll take a look at that.
 
Thanks all.

It's not as easy as "Oh, you should take option X" then? :D

I thought so :D

I'm talking to someone on Thursday but I think I'll just end up taking the safest option as I'm lucky enough not to have to take any risks.

Thanks again all.
 
Hi Alan

As mentioned in my post #4 then #9 there are ways to check the bone fides of the IFA's

Something to be aware of is that AFAIK the government service mentioned by Craig post #11 is a good starting point but a key aspect for that service is to educate you about the sort of scams that exist and what to do about seeking professional advice ~ they again AFAIK the gov advisors are not there to help you decide what type of pension is right for you (out of Annuity, FAD[Flexi Access Drawdown] a combo of both of there et al.

Though I am not trying to poopoo what the gov one does, as to educate folk about their pensions is vital, they are not trained to guide to "what you should ".

All the best with sorting it and making the personal choice that "right" for you.


PS side note any advisor that says he works on commission is not independent and is not one of the regulated ones...........though if s/he is registered and tells you that, IMO you should report them for incorrect practice!
 
Drawdown is when you decide how much to withdraw each year. This can be tax efficient if you are careful. I would check if this is possible with this pension as it is the route many are currently taking.
Annuities, which are to a large extent dependent on interest rates, are generally regarded as poor value. If you have health problems then they can pay more (because your life expectancy will be less). If you go this route, then it is a guessing game as to fixed v. increasing as no one knows the future rate of inflation.
Whether to take the 25% tax free lump sum depends on whether or not you need the money for a big purchase (pay off the mortgage or buy that new car etc). Leaving it in should give a higher return given that interest rates are so low. However, if you think the government will reduce this in future that might influence your decision.
Overreaching all of your decisions is the fact that you do not know how long you are going to live, so you are never quite sure how much you need.

Edit. Check if you can just leave the lot invested for now. If you don’t need the money it can be a cushion for the future (or for your dependants).
 
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Firstly, I will reiterate all the comments about taking professional advice.

I retired early 20 years ago. I had a company pension that had changed over the years with different inflation increases applied to different elements of the pension based on time periods. I think the pension handlers wanted to simplify the process and also the company wanted to be fair to those who retired on low salaries many years before. They offered the opportunity to take a much increased pension with no further inflationary increases or maintain status quo. I maintained status quo, as to take the increased figure together with earnings from part time job would have put me over the threshold for higher tax and I had retired early. Since that time my pension has been uplifted quite significantly by inflationary increases. Looking at current inflation levels, I might have made a different decision.

You need to talk through your options and your personal situation with a professional to assess what's better for you.
 
Can you clarify if it is a company “final salary” scheme or a “defined Contribution” scheme?
If the later you have arguably more options. If the former then some of the comments re drawdown and 25% tax free cash don’t apply...unless you get into transfer values and that is a completely different kettle of fish and judging by your comments one that isn’t probably suitable for you.
 
@woof woof

Alan

This is not advice but my understanding

  1. Annuity
    Fixed rate ~ this will result in a fixed pension per year until to die. It will not increase at all!
    Increasing rate ~ this will from when you take the pension increase year on year by the agreed amount....this may be above or below inflation but the rate applied is fixed.

    Rates for Annuities are (or were) dire, best was max 4% but depending on when you started your policy it may have what is called a GAR(Guaranteed Annuity Rate). Such a policy is like gold dust as they could likely yield 10% rate. (e.g. a £100,000 pension pot could be £4000 but with GAR you get £10,000 per year).
    For when you approach an IFA, it will be a good idea to ask your pension savings company if the policy has a GAR?

  2. Tax Free 25%
    Not just for buying high ticket items!!!!
    You could invest it in an ISA? Or another savings "vehicle" that will could yield more than the 4% mentioned above.
    Or if your outgoings are fairly modest:-
    As it is Tax Free, even in a simply savings account....or even better a savings bond that allows you to make withdrawals and you could use it an extras fund ~ a little treats top up each year.

  3. FAD
    The thing to consider here is that the pot will only increase (or in worst case scenario decrease :( ) by what the provider can obtain in growth based on shares investments (query other ways it might grow).
    So, as its name implies you can take whatever you like out of it per year but if the growth in a year has been say 5% and that year you take 7% of the pot out.....you have simply taken some of the capital out i.e. a smaller pot to grow next year.


  4. An FAD or any other non Annuity pension requires very careful handling and forward planning because as you can see above there is a real risk that you could simply run out of money depending on how long you live.

  5. An FAD pot is still a cash asset and can be included in your estate!

  6. Other types of pension provisions are available.

Just to repeat, as you can see it is not so much complicated as diverse & complex and any pension you decide on will be unique to you and your future needs and that is what an IFA is there to help understand.

PS based purely on the an IFA's hourly fee rate s/he should be conscious of what you pot size is and how many hours they will need to give you "your cost effective" advice.

Edit ~ as per @Craig1912 question ~ if you are in a Final Salary scheme.........lucky you AFAIK the scandle a few years back was "advisers" convincing those with that sort of pension to transfer out!!!! There needs to be very & unique grounds to transfer out of such a scheme.....again an IFA needed .
 
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FAD? Ah- flexi access drawdown from either a SIPP or Personal Pension:)
Thats what I’m doing. General rule of thumb is you should be able to take 4% per annum without eating into capital. One thing I think you have wrong is that a SIPPir personal pension that you are taking drawdown from does NOT form part of your estate for inheritance tax purposes which is why it’s not always a good idea to take the 25% TFC in one go.
Anyway this is probably confusing poor Alan even further!
 
Craig1912 said:
FAD? Ah- flexi access drawdown from either a SIPP or Personal Pension:)
Thats what I’m doing. General rule of thumb is you should be able to take 4% per annum without eating into capital. One thing I think you have wrong is that a SIPPir personal pension that you are taking drawdown from does NOT form part of your estate for inheritance tax purposes which is why it’s not always a good idea to take the 25% TFC in one go.
Anyway this is probably confusing poor Alan even further!
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I'm trying... :D
 
my situation is i am a company director putting a great deal of my income into my directors pension scheme (my main scheme) i have 2 other small ones.
by age 55 i should have approx £280k. once i hit 55 i shall start taking my max tax allowance per year which is currently £12,500 and leave my main pot invested in low/mid risk
the plan being my pot should maintain/grow. as i get older i might start drawing out more to combine with my savings, also once i hit 67 my state pension will kickin.

to be honest i may end up pension cash top heavy.
 
Mr Bump said:
my situation is i am a company director putting a great deal of my income into my directors pension scheme (my main scheme) i have 2 other small ones.
by age 55 i should have approx £280k. once i hit 55 i shall start taking my max tax allowance per year which is currently £12,500 and leave my main pot invested in low/mid risk
the plan being my pot should maintain/grow. as i get older i might start drawing out more to combine with my savings, also once i hit 67 my state pension will kickin.

to be honest i may end up pension cash top heavy.
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I quit work at 49 and to be honest I'd hate to go back, even presuming I could. When out and about now I look at buildings and imagine what's going on inside and I count my blessings. I have done some long distance computer based stuff and in fact that's how I met Mrs WW but for over 10 years now I've largely and mostly just lived off my savings/investments. These days I don't even do the computer based stuff any more as being on the pc at 2am and dealing with translation and cultural issues is only fun for a while.

One thing that hit me like a lightening bolt was when talking to someone at work who said that I shouldn't be looking to live just off income as I wasn't going to live forever. All I needed was enough to live on. It seemed so obvious once he said it and I left soon after that conversation :D The first few years my net worth actually rose but over the years as returns have fallen I've started to eat into my savings but not by a worrying amount, something like £12k per year which is manageable.

With this pension I don't need to take any risks. We have no children, Mrs WW's sister and brother have no children. There are children in my extended family but they're all ok. They'll get a little bump up from me/us at some point though but mostly what I/we have is just for us and enough.
 
Boots said:
There you go! Pensions become easy once you know your date of death!
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Yup. That's pretty much it, give or take.

When I quit work I was 49 I knew humans don't tend to live for multiple centuries so I at least had a starting point for the calculations, subtract 49 from a loooong life expectancy and factor in a few expenses and bequests and voila! A number! I sort of thought I'd be financially ok and so far I am as in 10 years with next to no significant income and although I've at times spend like a sailor on leave I'm only down about £40k. That's ok.

My point was just that sometimes people do I think tend to want to see their financial wealth maintained or even grow and that's a fine aim if you have dependants but (sadly) I/we don't so it really doesn't matter if I/we go to the Good Place with little money in the bank.
 
As others have said get professional advice.
I have Leukaemia with a probabilty of a shorter the average life span.
The IFA said -have you heard of an impaired life annuity ( No) I have one and it pays a lot more than a conventional annuity-in short get pro advise.
 
troutfisher said:
As others have said get professional advice.
I have Leukaemia with a probabilty of a shorter the average life span.
The IFA said -have you heard of an impaired life annuity ( No) I have one and it pays a lot more than a conventional annuity-in short get pro advise.
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Sorry to hear that Chris but hopefully you are enjoying life.

I'll be talking to someone tomorrow but I've convinced myself that I'll be taking the option with the lowest risk. All I want is a steady little income and if I live to get my state pension I may be giving and leaving a little extra to the younger ones and worthy causes.
 
The 4% “rule” has been around for a while. Nowadays with people living longer some ”experts” advocate 3.5 or 3 %.
As Craig says inheritance tax also needs to be considered.
The more you dig the more complicated it gets.
 
woof woof said:
Sorry to hear that Chris but hopefully you are enjoying life.

I'll be talking to someone tomorrow but I've convinced myself that I'll be taking the option with the lowest risk. All I want is a steady little income and if I live to get my state pension I may be giving and leaving a little extra to the younger ones and worthy causes.
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A lot to be said for taking the low risk option. You can just sit back and relax
 
Peter123 said:
The 4% “rule” has been around for a while. Nowadays with people living longer some ”experts” advocate 3.5 or 3 %.
As Craig says inheritance tax also needs to be considered.
The more you dig the more complicated it gets.
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Yep 4%has come from the USA, but that’s only if you don’t want to deplete capital. No harm in depleting capital- I’m taking 4-5% but that will reduce when state pension kicks in.
 
Thanks all.

After taking advice I'm going to go for the uplifted option.
 
Unless I missed it?

When retiring early i.e. before you have likely paid your NI for enough years to qualify for the full state pension. AFAIK there are mitigating actions you can take e.g. AVC's.

I suppose it all depends if you intend to rely on or anticipate receiving a full state pension once you hit your state pension retirement age???
 
I'll be 60 in May but stopped working when I was 49 luckily having built up some savings after years of being a workaholic and not having enough time or interest to spend it. I did check with the pension people and was told that I had indeed built up enough in the system so I should be ok there but even if I don't get the full state pension for some unforeseen reason it shouldn't be an absolute disaster.

Since the interest rates have collapsed I'm now spending more than I get in but it's manageable and this little private pension will go a long way towards me breaking even or even returning to the days when my income exceeding my expenditure, maybe, if I'm lucky. The state pension will only add to the comfort of mind but may let me give the younger ones in the family a bit more of a bump up.

Mrs WW has investments and property in Thailand and there's no children in the family so at some point that could be a factor but at the mo all my sums and decisions are based on my money only not ours. Just in case there's some disaster at the Thailand end.
 
Box Brownie said:
Unless I missed it?

When retiring early i.e. before you have likely paid your NI for enough years to qualify for the full state pension. AFAIK there are mitigating actions you can take e.g. AVC's.

I suppose it all depends if you intend to rely on or anticipate receiving a full state pension once you hit your state pension retirement age???
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You can pay extra NI if you haven’t got enough qualifying years for a full state pension. It can be worthwhile depending on how long you think you will live!
 
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