Starting the process of accessing your DC pension

[oxoman]

@Mazz use your pensionwise meeting wisely, make sure you have all the facts and figures ready to hand as it makes it so much easier. I'm currently sorting a DB pension out which is a little harder to sort out. I thought I'd get an annuity but have been advised against it and its suggested use the 25% then the remaining money put into a drawdown fund that works for you. It would seem better tax wise this way especially if still working. Good look sorting it out.

 

[ianrauk]

Can someone clarify. With an Annuity you can't carry on paying into the pension, but with drawdown you can, up to £10,000.
Is that correct?

 

[Mazz]

When I took my pension I only took the lump sum. I then took an annual drawdown as needed to supplement my wife's pension until I reached state pension age. At this point I stopped the drawdown, I'm now considering an annuity or other form of income. Plenty of ways to skin a cat, a good financial adviser will be a great help.

As for the wedding I completely agree. I only offered this as a consideration, no criticism intended and I hope none taken.

No worries at all mate, no criticism taken. I appreciate your comments.

@Mazz use your pensionwise meeting wisely, make sure you have all the facts and figures ready to hand as it makes it so much easier. I'm currently sorting a DB pension out which is a little harder to sort out. I thought I'd get an annuity but have been advised against it and its suggested use the 25% then the remaining money put into a drawdown fund that works for you. It would seem better tax wise this way especially if still working. Good look sorting it out.

You're not the first person to advise against annuities, a few other people have said the same.
I know of a few people who were also advised to do what you did (i.e. withdraw 25%, access the rest via a drawdown).

 

[figbat]

@Mazz use your pensionwise meeting wisely, make sure you have all the facts and figures ready to hand as it makes it so much easier. I'm currently sorting a DB pension out which is a little harder to sort out. I thought I'd get an annuity but have been advised against it and its suggested use the 25% then the remaining money put into a drawdown fund that works for you. It would seem better tax wise this way especially if still working. Good look sorting it out.

Pensionwise can only advise on DC pensions - I had a call with them approaching my retirement and they could only talk about the relatively small DC pension I had, not the large DB pension I had accrued.

DB pensions usually payout until death - are you cashing in the DB pension in order to buy an annuity? DB pensions are usually the gold standard, often paying a pension to your spouse on death too.

 

[T4tomo]

Can someone clarify. With an Annuity you can't carry on paying into the pension, but with drawdown you can, up to £10,000.
Is that correct?

Not exactly. There are maximum annual amounts you can pay into any pension, linked to your earnings that apply throughout your lifetime*.

If you access your pension through a flexible drawdown, you then trigger the MPAA (money purchased annual allowance) so can only get the tax advantages of contributions up to £10k per annum thereafter. Taking the 25% lump sum only doesn't trigger the MPAA.

If you buy an annuity with a specific pension pot, you can still contribute to another pension pot, subject to normal rules * above and with no MPAA.

Mind you, if you had bought an annuity that suggests you didn't particularly have much other earnings, so might not be able to contribute much anyway.

 

[Dorset Boy]

Can someone clarify. With an Annuity you can't carry on paying into the pension, but with drawdown you can, up to £10,000.
Is that correct?

Annuity - that pension used to buy the annuity is transferred to the annuity and so no longer exists, so no further contributions to that plan(s), but you can still pay into another pension.

Drawdown - if you just take the PCLS, and no takable income, the contribution limits to pensions are unaffected. If you take any taxable income, then you are retricted to £10,00 pa contribution for evermore. The contributions can go into the drawdown plan or another pension.

Under drawdown you do not need to take all the PCLS in one hit.
Under an annuity, if you don't take the PCLS at outset it is lost.

Annuities from security but no flexibilty. A level annuity cuurently provides about twice the sustainable level of withdrawal that a drawdown plan can offer.
Drawdown offers flexibility, but carries ongoing investment risk. Take out too much, particulalry early on, and you will run out of money. It also needs constant review.

Most pensions taken out pre-2015 don't offer drawdown.
No all annuity rates are the same, and if you have shortened life expectancy due to health or lifestyle you can get a higher rate.

Bottom line is, take proper financial ADVICE. The guidance serrvices have a place but cannot advise you.

 

[PaulSB]

You're not the first person to advise against annuities, a few other people have said the same.
I know of a few people who were also advised to do what you did (i.e. withdraw 25%, access the rest via a drawdown).

To date I'm also someone who advises against annuities, which is why I've followed the drawdown route.

Our circumstances are changing which is causing me to reconsider, stress reconsider, an annuity. My wife is terminally ill, in a few months the household will lose her two pension incomes leaving me with the state pension plus a survivor's pension. My pension pot has grown to almost the level it was when I retired and took the 25%, annuity rates are around 7% and there are suggestions the stock market is peaking. It could be a very good time to take value via an annuity.

My final decision will be based on the advice of our financial adviser.

 

[Mazz]

Thanks for the reply @PaulSB and I'm sorry to hear of your personal circumstances.