Can anybody help with pension advice?

[lungbing]

My maths is just not up to this, there are too many variables for me, so can any budding Alan Turing please advise me. The final choice is, of course, mine alone.

I currently get a company pension of 12,000 GBP per annum. This amount is updated yearly by the lesser of 5% or the rate of inflation in each January in the UK. The last two increases I can find were 320 and 387 GBP p.a.

My pension provider has offered me an increase of 4,000 GBP p.a. thus giving me 16,000 p.a., but from then onwards my pension will never increase.

My wife will eventually get a widow’s pension of half my final pension.

Simply put, is this offer a good deal?

I also get the UK state pension and a private one, both of which will cease at my death.

I will be just 68 years old when this offer starts.

Thanks very much.

[AyG]

The attached document shows the amount you would receive each year and the accumulated amount received for your current and proposed pensions. I've assumed that your current scheme grows at 5% (the maximum permitted), or 2.8% (roughly what your last two increases indicate).

Assuming inflation remains the same, the new scheme will pay more annually until year 11. Cumulatively it will pay more for at least 15 years (the maximum I projected for).

Pension_Projection.xls

[prakhonchai nick]

Nobody knows when they are going to die. If we did, the choice would be simple.

It looks like you are in a win situation by accepting the £4000 increase at least for another 12/15 years Note however that you will lose 20% of the extra £4000 through income tax. After that, should you still be living, it may have been preferable to continue with the current pension

Would an extra £4000 be more beneficial to you now rather than extra money in your 80s?

Should you depart within the next 12 years your wife would benefit from your having taken the extra money now.

I think I would go for the extra £4000

[sendintheclowns]

Nobody knows when they are going to die. If we did, the choice would be simple.

It looks like you are in a win situation by accepting the £4000 increase at least for another 12/15 years Note however that you will lose 20% of the extra £4000 through income tax. After that, should you still be living, it may have been preferable to continue with the current pension

Would an extra £4000 be more beneficial to you now rather than extra money in your 80s?

Should you depart within the next 12 years your wife would benefit from your having taken the extra money now.

I think I would go for the extra £4000

The advice given is high caliber. As advised, the impact of income tax is Key to your decision . Although, I'm not British, I recommend that you refer your case to a British wealth manager, living here in Bangkok. He will, most likely, have given advice on similar situations to yours, especially how to mitigate the tax bill. If you want, PM me for a reference, if you wish. If he can't help you,it won't cost you anything.

[prakhonchai nick]

With the latest CPI inflation figures being negative and RPI less than 1%. I think the extra £4000 is an excellent deal.Wish my pension provider would offer the same.

Money originating in the UK (earnings, pensions, dividends etc are all subject to UK tax, whether you are resident or non resident. Wouldn't waste my time (and money) with a wealth manager. He would likely as not recommend QROPS, which would cost a fortune in fees and other expenses! Only he would benefit in the long run!

[richard10365]

Just curious, how old is your wife? The excellent spreadsheet Ayg made for you shows 15 years assuming you will live that long (no disrespect). What are the chances your wife will live beyond that? Does the half of your pension that goes to your wife also get annual increases? If so, you might want to consider keeping things as they are rather than taking the money now.If you are both of similar age, it will be 11 years before the cumulative 4,000 will surpass your current set up. You will be 79 years old then. Worse case scenario, you live to 120 and you lose out on the profit your current set up will provide you.

[huawei]

Would the wife's pension be linked to inflation?

[mmh8]

I suggest you give it to me to "invest for you"

I will not lie to you, I will hold onto your money, spend it and not give you a penny of it back.

What I will do is promise you that expected returns are 0 as in you will get none of it back.

its a new company I have started up called

honest investments.

[Autonuaq]

There are option to have a better rate of your pension.but that depends on the personal case.

Is you are interested can arrange a meeting if it is possible for you and others who are interested as well in for example Bangkok.

[Keesters]

As it is your pension provider that has offered you this deal you can bet that they have worked it all out in their favour. But of course a lot of it is a gamble as to when you die. You may actually win. Nobody can be 100% sure. Take good care of yourself and have a long life.

[meatboy]

Nobody knows when they are going to die. If we did, the choice would be simple.

It looks like you are in a win situation by accepting the £4000 increase at least for another 12/15 years Note however that you will lose 20% of the extra £4000 through income tax. After that, should you still be living, it may have been preferable to continue with the current pension

Would an extra £4000 be more beneficial to you now rather than extra money in your 80s?

Should you depart within the next 12 years your wife would benefit from your having taken the extra money now.

I think I would go for the extra £4000

i would agree with nick.it would take you up to yr.80 to receive this amount,and at todays exchange rate 4,000gbp.x 53bht.=212,000bht. put into a fixed acc. at 2.5% would earn you over 100gbp.or 5,300bht. that over the next 12yrs. gives you over 63,000bht.AND YOU STILL HAVE YOUR CAPITOL.

ASK THE WIFE.

[MaeJoMTB]

Unless you plan on dying soon, keep the yearly raise.

How to compare.

Annuities that rise cost twice as much as Annuities that are fixed.

So to make your deal equitable, they should DOUBLE your existing pension to buy out any yearly rises.

[asdecas]

As it is your pension provider that has offered you this deal you can bet that they have worked it all out in their favour. But of course a lot of it is a gamble as to when you die. You may actually win. Nobody can be 100% sure. Take good care of yourself and have a long life.

Quite so, they will have actuary tables that give them the statistical likelihood that they will profit more than you by offering the deal. They will certainly not be feeling philanthropic.

[AyG]

As it is your pension provider that has offered you this deal you can bet that they have worked it all out in their favour. But of course a lot of it is a gamble as to when you die. You may actually win. Nobody can be 100% sure. Take good care of yourself and have a long life.

Quite so, they will have actuary tables that give them the statistical likelihood that they will profit more than you by offering the deal. They will certainly not be feeling philanthropic.

However, the pension provider and the pensioner have different objectives. The pensioner may want a higher immediate income, even though may mean (statistically), in the longer term, higher profits for the pension company. That is what is being offered here.

[mr jim]

I receive Uk state pension (frozen) I realise that this is slightly off topic but I recently was told that I can claim for my Thai wife. It comes under the heading of-Adult dependant. From what I gather, she must not be in work. It doesn't matter if she has been to the UK or not etc. etc. I have wrote to the Uk pensions and asked them for the relevant forms and any requirements docs. etc. Apparently it amounts to 60% of your state pension. Any light on this would be most appreciated. If I get a result I will post on here in the future. The pension people will NOT tell you about this, you must apply.

[SpokaneAl]

As some wise responders have suggested, the missing piece is the impact on the wife's share when you pass. Actuarially, women tend to outlive men, so I would be careful with any analysis that did not factor your wife's life expectations into the equation. Also know that as we age, our medical expenses tend to rise. If this is a potential issue that is not fully covered via insurance, it could be another reason to continue forward under the current system with its built in cost of living raises.

[nithisa78]

Sir, Maybe there's some good advise here. However, if I didn't know or understand,would take it up with a professional financial advisor.

Wishing you the best of everything.

Edited November 18, 2015 by nithisa78

[lungbing]

Gentlemen,and any ladies that commented,

I would like to thank you all for your help, particularly AyG for his spreadsheet which lays it out in a format even I can understand.

I have just emailed the pension provider asking them about my wife's future widow's pension, but our current feeling is to accept the increase.

We have two daughters just starting university and the money may come in useful now. I'll worry about what happens when I'm 80, when I'm 80.

Thank you all again,

Lung Bing.

[sandyf]

Gentlemen,and any ladies that commented,

I would like to thank you all for your help, particularly AyG for his spreadsheet which lays it out in a format even I can understand.

I have just emailed the pension provider asking them about my wife's future widow's pension, but our current feeling is to accept the increase.

We have two daughters just starting university and the money may come in useful now. I'll worry about what happens when I'm 80, when I'm 80.

Thank you all again,

Lung Bing.

Never forget the old sayings, they did not come out of thin air.

A bird in the hand etc.

[micmichd]

Nobody knows when they are going to die. If we did, the choice would be simple.

It looks like you are in a win situation by accepting the £4000 increase at least for another 12/15 years Note however that you will lose 20% of the extra £4000 through income tax. After that, should you still be living, it may have been preferable to continue with the current pension

Would an extra £4000 be more beneficial to you now rather than extra money in your 80s?

Should you depart within the next 12 years your wife would benefit from your having taken the extra money now.

I think I would go for the extra £4000

I would take into account the costs for a private health insurance, too. It's getting extremely expensive at the age of 70, so you might need a future pension increase. Edited November 20, 2015 by micmichd

[CaptHaddock]

It matters whether the OP views this decision as investment-like, i.e. the goal is to maximize the expected payout, or insurance-like, i.e. the goal is to avoid the worst-case scenario, which for a retiree is to be both old and poor. In my view decisions about pension options are definitely insurance-like. As with insurance generally, we are willing to take some loss, payment of a premium, for example, to reduce the worst-case scenario, such as the house burns down. From an insurance perspective the break-even period to take the higher immediate payout, an investment concern, doesn't matter.

I am not at all worried about inflation in the near term since persistently low inflation or even mild deflation is a bigger risk while we remain in the shadow of the 2008 global financial crisis. However, we cannot be sure that higher inflation will not return at some point in our future. If inflation were to climb, especially if it were persistent over time, the value of OP's pension could easily fall to the point of threatening his standard of living. And he would be out of options at that point as far as the pension income is concerned.

The longer the term of the pension the greater the risk of a ruinous period of inflation. If the OP's wife is younger than he the term of the pension could be substantially longer than his own life, in which case protection from inflation would have even more value.

Although he doesn't say so, it appears that the OP's retirement resources as they stand now, are adequate for a good standard of living here in Thailand. If that is indeed the case, why jeopardize the purchasing power of his pension just to increase disposable income in the near term?

So, I would recommend declining the offer.

[Eff1n2ret]

I receive Uk state pension (frozen) I realise that this is slightly off topic but I recently was told that I can claim for my Thai wife. It comes under the heading of-Adult dependant. From what I gather, she must not be in work. It doesn't matter if she has been to the UK or not etc. etc. I have wrote to the Uk pensions and asked them for the relevant forms and any requirements docs. etc. Apparently it amounts to 60% of your state pension. Any light on this would be most appreciated. If I get a result I will post on here in the future. The pension people will NOT tell you about this, you must apply.

The Adult Dependency Allowance was abolished w/e/f April 2010. As I reached State Pension age the previous September I was able to claim it for my missis. It will discontinue (for me, I don't know about anyone else) in 2020, if I live that long.

I guess that's what you were referring to, but good luck anyway.