Pensions uugghhh!

[ansi41]

Good morning everyone, hope you're all having a relaxing day so far.
A little question about pensions. I am aware that only a qualified person can give advice, this is more of a general query.
Years ago I used to work for a large electricity company but we all got made redundant in our office in 2002. I paid into their pension scheme whilst I worked there and when we were made redundant we had a good arrangement so that we could draw our pension at 50.
I am 50 next year (crikey that came round quick! ) so I have asked for a pension forecast if I want to start claiming it next year.
So they have said that I get a lump sum, plus so much per year (not a great deal but still..) , or I could take double the lump sum, with a reduction of about £500 per year off my yearly pension.
From that, it seems that it would be better to take the larger lump sum but are there any downsides to that, i.e. tax implications etc?
Also, at the moment I don't really want to draw the yearly pension yet, so could I just take the lump sum? They didn't seem that helpful when I called the pension company last week hence why I am here asking you knowledgeable Dibbers
Any help is much appreciated, but if I don't reply til later I am gardening, doing a tip run and preparing Sunday dinner Thank you x

[Guest]

Hi I am not a pensions expert and suggest to seek advice from a proper advisor. Big decision to make, and all schemes are likely to be different.

For mine, although the pension CAN be drawn at 50 it is reduced for every year I take it before the normal pension age. Then if I want to convert my pension bits into a lump sum it is reduced further again. That's a lot of reducing!

Presumably you have to be mindful of income tax thresholds, because if the lump sum takes you over the next threshold will you have to pay tax on it at the higher level? No idea if you do pay it at all, or if you do can you claim it back? I am proving my own point. You need a proper advisor 😂

[Pumpkin Pie]

You also have to bear in mind once you get the state pension on top of your private pension it could take you over the threshold for paying tax on your pension each month (unless of course it would be over that limit already). It’s a minefield.

[JudyC]

I can take my civil service pension and have been able to since I turned 50, but reduced at 5% for each year before 60. I've chose to hold on for another 3 years, turned 57 yesterday. Since I reduced my work hours I don't pay tax, but if I took the pension I would. As far taking a larger lump sum and reduced pension, I guess it depends on how long you live. Hoping I get maximum.benefit from my pension 😁 but no-one can predict the future.
DH took a pension early, but pays tax on his wages already.

[WhereIBelong]

I don't get the downer on paying tax.

I took my CS pension early alongside a part time job and do have to pay tax, but see that as a good thing- earning enough to pay something back into the system. Taxes are proportionate to income.

[Loobylou_82]

Plus you would only pay tax on anything you earned above £12,500. Even if you took your pension and paid tax on anything above that,you would be getting more money than if you hadn’t taken it, hope that makes sense.
An independent financial adviser is what you need. Also ask for a quote if you didn’t take a lump sum at all.Once you have spent your lump sum it’s gone. This is going to be your income for the rest of your life once you retire. It would help if we all knew when we were going to die of course!

[Lisbon]

With some pensions you don't pay tax on the lumpsum so ask them if that is the case
Rob

[Lisbon]

Originally Posted by JudyC

I can take my civil service pension and have been able to since I turned 50, but reduced at 5% for each year before 60. I've chose to hold on for another 3 years, turned 57 yesterday. Since I reduced my work hours I don't pay tax, but if I took the pension I would. As far taking a larger lump sum and reduced pension, I guess it depends on how long you live. Hoping I get maximum.benefit from my pension 😁 but no-one can predict the future.
DH took a pension early, but pays tax on his wages already.

See more...

My dad took the maximum lump sum and told me when he reached 82 that it was now the wrong choice, but how many people reach 82 and also when you get to that age there is a lot less you want to spend money on
Rob

[ansi41]

Well I'm back..dog walked, mowed the lawn and tip run completed
Wow, it certainly is a minefield. I thought it was complicated but there is certainly a lot to consider. My information pack doesn't say anything about reducing the yearly pension if I take the lump sum, but then again, I haven't gone through it with a fine tooth comb.
I think I am a bit wary about financial advisors (sorry if you are a reputable one as this doesn't apply to you ) as I don't think they do much for nothing and will they want to sign me up to some "investment opportunity" so they can get a nice commission? Sorry if that sounds bad but my mum and dad had one and they signed them up to some very dubious schemes and they lost quite a sum of money.
Anyway, it does seem apparent that I need to take some advice so that will be my plan within the next few weeks.
Thanks for your replies

[deeley]

I’d have a look at today’s news too, about pensions and age changes being sped up...
Always clobbers me...I’m only 44 and every new thing brought it seems to affect me!