Taking Personal Pension and retirement benefits early

Should you take your retirement benefits early?

When inflation, interest rates and returns from personal pension plans were illustrated in double digits, the common perceived wisdom was to delay taking your pension plan as long as possible, or indeed to delay taking retirement benefits.

This is not the situation we face today, and it may be better to take retirement benefits early.

We have developed a system that will analyse your current pension, taking into account how long you have to go until retirement, how much you contribute, your tax position and what rate of growth might be achieved. We can then produce a graph showing how long it would take for you to recoup the money you could have been enjoying as income by talking early benefits.

Take the following example, based on a purely fictional character which should not be construed as a recommendation! :-

Ron Taylor is 60 years old. He has £55,000 in a personal pension plan with the Perennial Life Insurance Company. He is invested in their with-profits pension fund, paying a 4.75% bonus rate. Perennial are imposing a Market Value Reduction of £1,000 if Ron takes his benefits now. Ron is a basic rate tax payer and contributes £50 per month gross to the plan.

If Ron converted the fund to an annuity now, he would get a rate of 4.7% on the £54,000, equivalent to £2,538 per annum gross. If Ron were 65 the annuity rate would be 5.3%, so, surely, he should wait, because in five years his fund would be worth £73,712, giving an annual income of £3,906 a year, some 54% better.

If he stopped his contributions, he would be £50 a month better off and he would receive £212 per month gross from the pension taken early. So, how long would it be before the extra pension at 65 has recouped the income and savings he has made over the last 5 years?

This is where our unique pension calculator comes in. Click here to see how Ron's graph looked and what it meant to him, then click the Contact button above and let's talk!

Asset Investment Management is an Independent Financial Adviser (IFA) based in Norwich. If you want to take your personal pension benefits early, or retire early, we can advise people in Norfolk and Suffolk.