Pension

[jrtv]

I have a small pension with Zurich which is now due, I have a pension fund of �34520 which they say I can have �8630 now and �1447 a year, however they also say I can wait until April 6th when there will be "significant changes" and I might or might not be better to wait until then, so does anybody know anything about April 6th changes ? help needed !!

[Sweet G]

6th April 2006 is the start of Pension Simplification where the current 8 different sets of pension rules are condensed into one. For your example the figure of �8630 is your Tax Free Cash (TFC) which is a maximum of 25% of a personal/stakeholder pension at retirement both now and after 5th April. What will change for you, is how the remainder of the fund is dealt with. Currently your only option is to buy an annuity or leave the fund be until age 75 at which point you are forced to buy an annuity. From 6th April you will be allowed to use "drawdown" where you can take as little or as much as you like (subject to Inland Revenue limits) from your pension fund. This option preserves the value of your pension fund as opposed to buying an annuity where, essentially, your pension is given up for good. The risk in not taking your pension now is a potential fall in the value of the assets in which your pension fund is invested.

[jrtv]

What a great answer Sweet G, thanks, I am filling in the form now and I am stuck on type of pension, Level or Escalating, I can pick Escalating up to 8.5% per year or should I stay with Level ?

[Sweet G]

Hi jrtv, let me qualify my answer a little. You can use "drawdown" now if your provider makes that facility available. From 6th April this will be more widespread and the maximum drawdown percentage is to be increased and this will offer greater flexibility than an annuity. Also you will not be compelled to buy an annuity at 75 and can use drawdown until you die.

Sounds like you are optng for an annuity. Please make sure you understand what this means, you surrender ALL of your pension fund in return for an income payment until you die. If you are happy with this, Level means the payment (be it annual, quarterly, or monthly)stays the same until death. Escalating will mean the payment grows by the stated percentage each year, initially you will receive a lower payment than you would with a level annuity and it could take some years for the escalating payment to reach the standard of a Level annuity. If you dont need the money and you are in good health escalating annuity may be suitable. If you do want an annuity you can get one from someone other than Zurich who may pay more. This is possible if your policy has an "Open Market Option" I strongly suggest you seek advice from an IFA who specialises in pensions so you can fully explore your options. That said I hope my info has thrown some light on your situation.

[jrtv]

I've took everthing you have said on board and I thank you very much, that's really helped me. xx

[Hard@it]

Go on jrtv give Sweet G a rating, you cannot ask much better an explanation for free than the one you got !!!!

[jrtv]

Hi Hard@it, I honestly thought those people at AB did the rating, however after your post I found the button so many thanks for pointing that out to me.

[Hard@it]

That's better !