Pensions Advice Required

[Veritas]

I'm interested in some general pensions advice. My circumstances are young Thai wife (20 years younger) stepson aged 7 and newborn daughter. I would like to retire to Thailand in a few years as I am 50 next year. Most of my pension funds are in a frozen Personal Pension and frozen company scheme from my last employer. I have a large mortgage.

For the immediate future, can I take a lump sum out of the Personal Pension when I turn fifty and pay off the mortgage. This will save me £600/month in interest.

Longer term, annuity rates seem to be rubbish and will not provide for joint annuities with such an age gap. How best to provide for the wife and kids without giving everything to the wife up front?

Veritas

[GuestHouse]

You can take money out of your pension but you would be foolish to do so.

In the first instance you would loose the contributions made into your pensions by both your employer and the tax man. (You are going to take an imediate hit of around 20%).

Secondly, unless your pensions are extremely unusual you will also loose out on most, if not all of the growth in the fund you have saved - this could be a huge percentage of the fund.

Thirdly, while I hear what you say about annuities, they do not give fantastic returns, but they do give something that is extremely important in retirement. Steady, Secure Income.

This is going to be even more important to your family as you get older and eventually die. It is going to be of critical importance to your child.

My advice is talk to a financial advisor about other options, for example, you say you have a large mortgage, but what is the equity/debt ratio and how is your house price going?

Houses have historically been very good investments, look at the five year and ten year expectation of growth.

There are some changes coming next year in pension laws are said to include letting you put part of your pension in the house you live in - however, that might not necesserily mean removing pension fund to your house, you might for example add the equity in your house to your total fund (on paper) such that it becomes tax efficient.

The changes to pensions law are also said to include changes to Annuity requirements Again talk to a financial advisor but if he/she is telling you to move funds this year, get another adivsor. With such extensive changes to the law coming up, the advice I was given was 'Wait'.

One last point.

I know that it is tempting to see the pot of money in your pension as something you can get hold of and then invest in Thailand. But weigh these two things -

1. Annuity rates are low right now and anyway the rules are set to change.

2. There has never been a truer statement than 'Don't invest money in Thailand that you can't afford to loose'.

If your only income in retirement is a pension from overseas, you can't afford to loose it.

And then there is my own wise word.

An overseas pension is a steady income, a secure income AND IT IS YOUR INCOME.

When you move to Thailand it is about the only thing that cannot possibly be taken off you.