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PENSIONS ADVICE PLEASE

SwissPaul
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PENSIONS ADVICE PLEASE

#384102

Postby SwissPaul » February 6th, 2021, 11:15 am

AM 64 and looking at retirement. Have Pension at moment (900 per month) and also will be above to access another 400 per month in 6 months' time.

I have £40 k in a DC fund that sits with Phoenix and at the same time have a DB (Phoenix) pot just over £240 k.

I asked them about combining both, they said no you can't do it. You can drawdown on your DC but you must take up an Annuity with Phoenix.

Therefore, I am thinking of transferring the lot into a SIPP, assuming I can get an IFA to carry out a transfer for me as I can then manage my money

Also, how would I go about searching for an Annuity and would it be possible for me to transfer direct from Phoenix direct to a new Annuity provider?

As an aside my partner does not work would it be worthwhile opening up a SIPP or the best way of minimising tax for both

Any help would be very much appreciated.

thanks
Swiss

swill453
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Re: PENSIONS ADVICE PLEASE

#384104

Postby swill453 » February 6th, 2021, 11:20 am

SwissPaul wrote:I have £40 k in a DC fund that sits with Phoenix and at the same time have a DB (Phoenix) pot just over £240 k.

I asked them about combining both, they said no you can't do it. You can drawdown on your DC but you must take up an Annuity with Phoenix.

I don't really understand this. If the pot has a value, and you have to take an annuity from it, then it's not DB, it's DC.

It may have some guarantees associated with the annuity rate, so you'd have to be certain about this before considering transferring to a SIPP.

Scott.

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Re: PENSIONS ADVICE PLEASE

#384382

Postby DrBunsenHoneydew » February 7th, 2021, 10:20 am

swill453 wrote:
SwissPaul wrote:I have £40 k in a DC fund that sits with Phoenix and at the same time have a DB (Phoenix) pot just over £240 k.

I asked them about combining both, they said no you can't do it. You can drawdown on your DC but you must take up an Annuity with Phoenix.

I don't really understand this. If the pot has a value, and you have to take an annuity from it, then it's not DB, it's DC.

It may have some guarantees associated with the annuity rate, so you'd have to be certain about this before considering transferring to a SIPP.

Scott.

While a DB pot doesn't have a current running value in the way of a DC pot, it can have a deemed value for LTA and AA tax purposes, and has a transfer value - CETV, and a value/cost to replace with an annuity.

swill453
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Re: PENSIONS ADVICE PLEASE

#384385

Postby swill453 » February 7th, 2021, 10:28 am

DrBunsenHoneydew wrote:While a DB pot doesn't have a current running value in the way of a DC pot, it can have a deemed value for LTA and AA tax purposes, and has a transfer value - CETV, and a value/cost to replace with an annuity.

Later though, he said he must take an annuity, hence my puzzlement at it being DB.

Scott.

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Re: PENSIONS ADVICE PLEASE

#384546

Postby Chrysalis » February 7th, 2021, 7:25 pm

It sounds like it is either a retirement annuity contract or (more likely) a DC pot with a guaranteed annuity rate.
If it is the latter, then advice will need to be taken and paid for, before any transfer out which would lose the guarantee. If the former, probably can’t transfer.
What is the annuity rate on the Phoenix policy? GARs that date back to the 90s or 80s can be so high you would never match them from transfer to a SIPP, or my shopping around on the open market.
Without understanding the nature of that policy it’s not really possible to say much else.

Ps. Now wondering if it might be a section 32 buyout policy?

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Re: PENSIONS ADVICE PLEASE

#384547

Postby Chrysalis » February 7th, 2021, 7:27 pm

The smaller pot £40k sounds like no problem if you wanted to transfer out and manage it yourself.
No advice needed.
I suggest you get a Pensionwise appointment to better understand the options.

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Re: PENSIONS ADVICE PLEASE

#384553

Postby monabri » February 7th, 2021, 7:49 pm

The 240k pension sounds like it is a defined contribution (DC) rather than a defined benefit (DB).

I'd definitely be looking for any Guaranted Annuity Rate (GAR) on the policy..... My wife has just taken out an annuity on a pension fund as the GAR effectively gave a fixed rate return of near on ~7% which I would not wish to try to match via an income IT/ HYP(single life, flat rate). The GAR increased the annuity by 85%. If a GAR is attached, I'd think very very carefully about giving that up.

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Re: PENSIONS ADVICE PLEASE

#386724

Postby SwissPaul » February 14th, 2021, 8:01 pm

Hi All,

Thnak for the advice so far.

I spoke with Pensionwise which i think is a person sitting there advising on yes / no anwers.

Looking at my pots - its:
DB - Max Lump Sum £38k, Pension of £5.8k. Or pension of £7.2k. Tranfer value £240k

DC Max Lump Sum £11.8k, Remaining fuind of £35k (am surmising to do with it as I like. Transfer value £47K.

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Re: PENSIONS ADVICE PLEASE

#386732

Postby GrahamPlatt » February 14th, 2021, 8:49 pm

7.2k for 240, they’re offering 3%. Flat or index-linked (and if so, RPI or CPI)?. Either way, I’d be tempted to take both sums (DB +DC) into a SIPP and split the £287k between ~10-12 ITs aiming for a 4-5% overall dividend return. I know, the annuity’s a bird in the hand, and certain, whereas managing it yourself is “risky”.

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Re: PENSIONS ADVICE PLEASE

#388161

Postby airbus330 » February 20th, 2021, 11:36 am

For what its worth and not knowing the OP's circumstances in full. On the basis of the figures given, this is a modest amount of money to be retiring on. I would be very much inclined to protect a minimum income, bearing in mind that generally, people spend less once retired and as that retirement progresses the spend falls further.
So, if I were in this situation, I would keep the DB pension and take it at its full value. At 64 (and assuming full NI record) a state pension is soon forthcoming so boosts guaranteed for life income to c. 17k. Assuming no debt and a modest lifestyle you could finance the basics of life with this. The remaining money in the DC scheme could be regarded as the bucket list pot. Assuming no debts to pay off, I'd be looking at taking UFPLS drawdowns, which leaves the remaining capital to grow tax free, for holidays, trips car replacements etc. as they come along. This shouldn't be done while still paying into a pension as it triggers the MPAA and timing the drawdown might be important to mitigate tax liability. Alternative is to take the PCLS tax free 25% of the DC fund and use that as a cash buffer for luxuries and drawdown on the remaining taxable 75% as you need it. again bearing in mind that any drawdown of the 75% triggers MPAA if you are still working and/or contributing to a pension.
A lot of TLF will instinctively veer towards investing in the market and a are very knowledgeable about the risks. Some also have DB pensions underpinning their investments. I found that when I retired 18 months ago, my attitude to the risk of heavy losses from my Pot changed to being very conservative. I do not have a DB pension or state pension, so how I invest dictates whether I eat or starve!

taken2often
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Re: PENSIONS ADVICE PLEASE

#388313

Postby taken2often » February 20th, 2021, 11:52 pm

Two simplistic points. You are 64. 26 years until you are 90 if you live that long. Divide the pot by 26 years no investments nothing. That's your pension and it is better than what you are being offered. Selling annuities is a profitable business but for you you need to lat until around 90 just to get your money back.

You invest and create your own annuity, objective to draw a natural yield of say 4.5%. This gives you a similar income. By using UFPLS you get more PCLS. The thing is not to worry about the capital that will go up and down. When you hand over your pot for an annuity you just go by the income. If you have invested for dividend growth your income should grow and you may get to the position take 80% reinvest 20% to help cover inflation.

If you have a spouse or partner they can continue with the same income no annuity drop, and there will always be something to leave at the end.

SwissPaul
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Re: PENSIONS ADVICE PLEASE

#389712

Postby SwissPaul » February 24th, 2021, 7:31 pm

All, thanks very much for the replies ( I wont say advice!).
Queries please if you can help.
Can yo uexplain a bot more in detail please - or give me a pointer to where I migh reserach teh followig:

By using UFPLS you get more PCLS. What do these acronyms mean and where would you recommend that I read further please.

regards

Swiss (no gold)

swill453
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Re: PENSIONS ADVICE PLEASE

#389716

Postby swill453 » February 24th, 2021, 7:41 pm

SwissPaul wrote:All, thanks very much for the replies ( I wont say advice!).
Queries please if you can help.
Can yo uexplain a bot more in detail please - or give me a pointer to where I migh reserach teh followig:

By using UFPLS you get more PCLS. What do these acronyms mean and where would you recommend that I read further please.

UFPLS is Uncrystallised Funds Pension Lump Sum. This is a type of drawdown where you take a partial payment from an uncrystallised pot. 25% of it is tax-free, the other 75% is taxed at your current marginal rate.

PCLS is Pension Commencement Lump Sum. This is the 25% tax-free lump sum you get if you crystallise your whole pension at once.

Taken2often is being a little disingenuous by saying you get more tax-free if you use UFPLS. It is only the case because you're delaying taking the tax-free entitlement, thus giving it time for more growth.

If you took the whole PCLS at once and invested it elsewhere (in an ISA, for example), you'd get the same amount.

Scott.

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Re: PENSIONS ADVICE PLEASE

#389805

Postby taken2often » February 24th, 2021, 11:14 pm

Scott gives a good explanation, but as I see it . If you take the full PCLS and put it into a ISA that's only 20k per year so it may take a while. The LTA allowance (Life Time Allowance) is indexed and the maximum PCLS increases each year. So drawing your pension for say 25 years under UFPLS you would get a.lot more than taking it now from your existing pot. A lot depends on income and growth and how much you draw of course

Bob


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