The Retirement Newsletter: What did I learn from my Pension Wise meeting?
Issue Number: -19 — Was the Pension Wise meeting helpful?
Welcome
Welcome to issue -19 — What did I learn from my Pension Wise meeting? And was it worth 50 minutes of my time?
What is Pension Wise?
Pension Wise is a free service the UK government offers for people about to retire. The service consists of a website and a free 60-minute face-to-face or over-the-phone interview and is a service from MoneyHelper.
I opted for the phone.
For the meeting, they need to know what type of pension you have — defined contribution, career average or final salary. Hence you need to collect all your information together.
My meeting was with a very nice chap and lasted 50 minutes.
At the start of the meeting, he pointed out that it was not financial advice.
At the end of the meeting, I was sent a link to a document containing much of the material we covered in the meeting.
What did we discuss?
OK, first off, I would like to say that I am not a financial advisor. I am writing about what I have read over the years about money and preparing to retire. This is not financial advice.
The meeting was scripted and was one of those ‘branched’ types of scripts in which my answers to preset questions dictated the direction of the discussion.
In the meeting, we went over the MoneyHelper website and discussed the ‘Taking your pension’ section of the website.
The website is helpful as it has a range of tools and advice on:
Tax you pay on your pension
Working out how much money you’ll have now and in retirement, and planning how long your money needs to last
How your pension could affect your entitlement to benefits
How to avoid pension scams
We then looked at the six options for taking a ‘defined contribution pension’, and these included:
Retire later or delay taking your pension pot
As it suggests, you retire later and leave your pension in the pot to grow. However, you may have to watch out for ‘management’ charges. For more information, see — Retiring later or delaying taking your pension pot
Get a guaranteed retirement income (annuity)
This I discussed in Annuity vs. drawdown — what is the best way to use my retirement savings? — You buy an insurance product (an annuity) that gives you a guaranteed income. You could also take 25% of the pot tax-free before you buy the annuity. For more information, see — Guaranteed retirement income (annuities) explained — A guide to tax in retirement — Compare guaranteed income products (annuities)
Get a flexible retirement income (pension drawdown)
I also discussed this in Annuity vs. drawdown — what is the best way to use my retirement savings? — You take 25% of the pot tax-free and draw the rest as needed. For more information, see — What is flexible retirement income (pension drawdown)? — Understand and compare your investment pathway options (for pension drawdown) — A guide to tax in retirement — Do you need a financial adviser?
Take your pension as several lump sums
This approach is similar to number three, except you pay 25% on the amount you draw down each time you take money out. That is, you don’t a tax free lump sum. For more information, see — Shopping around for pension income products and providers at retirement — A guide to tax in retirement — Do you need a financial adviser?
Take your whole pension in one go
You can take your whole pension in one go. You pay no tax on the first 25% and the remaining 75% as income that year. You have to be careful about this, as you could pay a lot of tax if you push yourself into a higher tax bracket. For more information, see — Do you need a financial adviser? — Retirement planning: preparing for retirement checklist — Taking your whole pension pot in one go — How to spot a pension scam — What happens to my pension when I die?
Mix your options
As it suggests, a mixture of the above. For more information.
We discussed a lot of the pros and cons of the above approaches, and I was given in the document a list of questions I should ask about taking any of the above options. You can find more information about this at: What can I do with my pension pot?
We also examined Final salary and career average pensions — Defined benefit (or final salary) pensions schemes explained.
Please note I am not a financial advisor. I am writing about what I have read over the years about money and preparing to retire. This is not financial advice.
What did I learn?
From the meeting, I learnt quite a bit. A close look at the six options for the defined contribution pension was beneficial. I had thought and read about most of the alternatives discussed but had not considered all six simultaneously or looked at the advantages and disadvantages.
One tool that I found very useful and quite reassuring was the Pension calculator. The calculator asks for my date of birth, planned retirement age, and current income (which it then takes a percentage of to get a desired pension income — a different rate is used depending on your current income). Next, it asks for my defined contribution scheme amount and defined benefit pension income.
Assuming you take a guaranteed income for life (an annuity), which will start paying from your selected retirement age, the calculator predicts your income and any shortfall or surplus on what it thinks you need.
I found the outcome quite reassuring.
Finally, I got an action plan from the meeting.
The next steps
From the meeting, my action plan is:
Track down a lost pension — I don’t hold out much hope for this; it was a long time ago, and a tiny pension.
Speak to the tax people to find out why I seem to be missing some contributions to my pension. One part of the government website says I am fully paid; another section says I am short by three years.
Find a financial advisor.
Was it worth it?
Yes, it was.
I learnt a lot (never a bad thing), and I came away with an action plan, a ton of material to read on the really handy website, and a reassuring calculation that my pension pots are on track.
My advice — take the meeting. It’s worth the time.
Travel — Nostalgia Corner
This week, here are some more stories and photos from my trip to Myanmar:
Myanmar (Burma) — Birds in Yangon (Rangoon), Myanmar (Burma) — The birds of Yangon — people in Yangon like their birds.
Myanmar (Burma) — Buildings of Yangon (Rangoon), Myanmar (Burma) — The old buildings of Yangon — revealing the past. There are some great old buildings in Yangon; sadly, many are in disrepair. And when I visited, there seemed to be several abandoned military places. I bet they are now in use.
Myanmar (Burma) — Merchant Street Market, Yangon (Rangoon), Myanmar (Burma) — This was an exciting find — a ‘locals market’.
Myanmar (Burma) — Buddhist Monks of Myanmar (Burma) — There are a lot of monks in Myanmar
Myanmar (Burma) — Travel Tip: Taxis in Myanmar (Burma) — Taking a taxi in Myanmar — my first trip was so scary!
Next week, more stories and photos from Myanmar (Burma).
Useful links
UK Government Website:
Next week
Next week, in issue -18, I ask the all-important question — How did your summer go? (Or, how did your winter go if you were in the Southern Hemisphere?)
Thanks
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Until next time,
Nick
PS, If you want to contribute something to the newsletter — a story, advice, anything — please get in touch.
Please note: I am not a financial advisor. Writing about money and financial matters is based on things I have read over the years about money and preparing to retire. IT IS NOT FINANCIAL ADVICE.