Re: Questions I need to ask
Originally Posted by Primus1
Thatís the thing, I just donít know, I just want some kind of safety net just in case I quit my job, a cash lump sum sounds tempting as is fully retiring, although I doubt this will be the case, I plan to semi retire at the very least...
Semi-retirement is good IMO - still gives you flexibility and the ability to earn if you have to. A lump sum (unless you wish to spend it all) needs to be managed to maximise it's earning potential. This depends on how risk averse or otherwise you are. The higher the risk to your lump sum the better the return. Ordinary savings with little or no risk do not pay much at all at the moment and they don't keep up with the cost of living anyway. IFA's and the banks will be best to advise what is on the market at any one time.
If you are not in a final pension scheme and it is an annuity you will be purchasing with some or most or all of your pension, I think there should be the choice of taking that annuity index linked to the cost of living index (although there is always a limit - for example the limit could be up to 5% p.a.) If the cost of living index goes up 3/5% then you will have that amount of increase on your annuity each year. To get this sort of annuity there is always a bit of a sacrifice to the amount you receive - the annuity amount is higher if you don't choose to index link it. Then you have to think about how long you might live. If you are healthy and fit it is worth index linking if you can IMO, but if you don't expect to live long that is another matter to consider in your decision making Maybe if this is the case it is best to get the highest amount you can without the frills. I think (and I don't really understand how much weight it carries overall) that your health profile will have a bearing on the amount of annuity you can buy - i.e. heavy smoker, overweight, etc. you could get a higher annuity. Fit as a fiddle, no health problems and you could well get a lower annuity than the person with a poorer health profile. In other words you take a bit of a gamble in your decision and hope the gamble pays off long term.
Family and dependents also figure in what sort of annuity you choose. You can choose to take the annuity and have that annuity die with you, or you can arrange to carry over - probably half the monthly amount - to your spouse to ensure she has some security when you have gone. If you wish to include your wife and leave part of your annuity to her again that will also have implications on the amount of annuity you can buy and it ill be lower than if you don't include her. Annuity rates also vary from provider to provider and you do not have to buy your annuity from the pension policy it is tied to. You have freedom of choice between annuity providers - the amounts they quote will vary between companies - so you need to have a good trawl round for quotations when the time comes.
A lot to think about and you will have your invididual thoughts about what is important to you. We are all different. When my husband retired he was lucky and had an index linked work pension for the most of his private pension so it was straightforward and he only had to decide if he wanted to leave me any if he died first. He bought a small none index linked annuity from an amount he had saved in a pension pot separate from his main one. This annuity made no provision for me as it was not that large. The main one does make provision for me and I will be able to have half of his pension if he goes before me.
I am sure when you go to your information giving session all these things will be pointed out to you. In the meantime think out what you would want from a pension annuity and go prepared with a few questions relevant to your own circumstance. With pensions IMO there is no such thing as "one size fits all" Best wishes