Ask a planner answers: maximising pension returns

Tuesday, June 7, 2016

The question, from clifford smith, 64 from Bolton

"I have a small Guaranteed Minimum Pension due March 2015 of [at Nov 2014 ] 9.4k I have got a personal pension from 2010 from which I took 25% tax free. I have various health issues and want to maximise the returns."

The answer, from Andy Nevett CFPTM, Freedom Financial Planning

This is a complex area and more information is required to give Clifford Smith a comprehensive answer. The good news is that there are more options with new pension rules proposed from April 2015.

  • The Guaranteed Minimum Pension (GMP) implies that you have a Defined Benefit or Final salary Scheme, with guaranteed benefits dependent upon service and your salary when you retire. These are valuable and usually inflation proofed  and should normally be retained. However, if you are seriously ill and/or have no spouse/dependants you could explore transferring benefits to your personal pension plan to buy a flexible income, which could be higher BUT is not guaranteed! It is possible that you have a defined contribution (Money Purchase) benefit with a GMP underpin. Further investigation is required from a qualified professional.
  • In addition it appears that you have drawn the 25% maximum tax-free cash from your existing personal pension. If you have not bought an annuity already you could investigate buying an impaired life annuity. Typically you will enjoy a 10% increase in benefits, with health issues such as high blood pressure, cholesterol etc. These are individual and need to be explored with an independent adviser to maximise your returns.

Andy Nevett CFPTM, Freedom Financial Planning