Pensions scandal

Dennis

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Hi Graham,
Think of the money that has been paid into your pension like savings that you would pay into a bank account. Say you decide you want to buy a new car so you save up for it by paying into a bank savings account. When the time comes to buy the car, you don't have to buy it from the bank you have saved with. You have the option to shop around and get the best deal available to you.

Its just the same with a pension. Once you decide to "cash in" the pension by buying an annuity, you don't have to buy it from the company you have been "saving" with. And your entitlement to an enhancement is determined by your health at the point you decide to buy the annuity, not what what your health was while you were going through the "saving up" phase.
 

Graham55

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101
Thanks Shadwell,
I didnt like pensions very much because of all the hoo haa over the Daily Mirror thing and thought its just another way to get money from the working people.
I had the idear that if i paid my mortgage of by paying twice the monthly payment each momth then after it was paid off keep paying the same ammount into a saveings plan i could make a pension that way but with all this credit crunch i can still pay the extra but will be seeking better advive one to one, from someone who realy knows.
T2 Since last September.
 

Dennis

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Hi Graham,
From what you have told us, and I am sure Shadwell would agree, it is probably pretty important that you should seek independent financial advice as your situation is far from the standard one. There are many options open to you and, even if you have to pay for the advice, I think the benefits that you would gain from professional advice will outweigh the costs many times over.
 

Graham55

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101
Many Thanks Dennis,
I have always belived in you get nought for nought, so if i pay for advice the guy should be on my side, lol.
I have sorted out everything else finnancial but this was so complecated that it just got put on the back burner.
I dont know about any pension from work and im off at the moment so when i go back will be asking if there is a company one then with there and my detailes will be going to a profesional.
No good going with only half the information.
T2 since last September.
 

JamesA

Active Member
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35
Is there any time limit on the enhanced pension payments?
i.e. if it turns out you do live longer do you continue to get the higher payments for life?

The other pensions question I think would be how easily you can get the money if you get ill and know you're on your way out before you get to your retirement age and want to go on a spending spree :wink:
 

shadwell

Member
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21
JamesA said:
Is there any time limit on the enhanced pension payments?
i.e. if it turns out you do live longer do you continue to get the higher payments for life?

The other pensions question I think would be how easily you can get the money if you get ill and know you're on your way out before you get to your retirement age and want to go on a spending spree :wink:


Hi James, no there is no time limit on the enhanced annuity payments. The annuity provider has actuaries who decide an average life expectancy for various medical conditions and if your lifespan turns out (hopefully!) to be longer than this average then that's the risk they take and it's your gain!

Regarding how soon you can take retirement, that would depend on the type of pension plan you have. Current legislation allows most personal pension plan holders to take their benefits from the age of 50. However, employer based schemes such as final salary schemes may allow you to take your retirement benefits earlier on medical grounds although the grounds on which this would be permitted and the amount of pension payable would depend on the particular scheme.
 

Dennis

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JamesA said:
The other pensions question I think would be how easily you can get the money if you get ill and know you're on your way out before you get to your retirement age and want to go on a spending spree :wink:
Hi James,
If you mean can you take the pension money as cash and spend it, I'm afraid the answer is no. Current legislation surrounding pensions says that you can't just cash the pension in. You can only use the money to buy an annuity. You are allowed to take 25% of your pension fund as cash (tax free) but the rest has to be spent on an annuity.

If you knew that you had very little time left, then you would be best to leave the pension fund where it is rather than buy an annuity, because when you peg it all the money in the fund will be paid back to your executors as part of your estate. What you could do of course (and this is just a thought not advice to you!) is borrow the money you want to splash out from a friend or relative, and leave them the amount you borrowed in your will. They then get paid back the loan after you die!
 

Dennis

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Just for information, the Financial Services Authority (FSA) on Friday 1st August published their findings on their investigations over the open market option (OMO) and how pensions companies try to cheat their customers out of getting a better annuity. This is an extract from a summary of the FSA report:

"Almost 40% of firms failed to meet the minimum requirements set by the FSA. These include not explaining what the OMO is or that it can lead to a higher pension income. Very few firms mentioned the advantages of shopping around for customers with health problems that could lead to an enhanced or impaired annuity.

Issues with prominence of the OMO information in 'wake up' letters was also indentified, where in some cases it was hardly mentioned or left until late in the letter.

Some companies claimed in their literature that there is no such thing as ‘the best rate’ mixing up the best type of annuity with the best rate.

In terms of transferring funds, delays had occurred in over 60% of annuity transfer cases reviewed. The complexity of the process and confusion caused by the diversity of forms used to complete transfers were identified as key reasons for delays.

The FSA made individual recommendations to those firms and work on these issues needs to be completed by December 2008."

Well done to the FSA for reinforcing what I have been telling you. It's now official, but remember you heard it here first!!
 

Graham55

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Messages
101
A big Thank You to all who have had there say, all this confused me so i just left it, but now I`m going for it.
No company one even though there are more than enough people working for the company, so its down to paying for advice, but after all i have read i belive its worth the money.
Many thanks to all.
T2 Since last September.