Question re: Matured Personal Pension

M

MichaelAnTon

Registered User
Messages
14
Hi,

I had a personal pension scheme with Standard Life which I took out approximately 15 years ago. It has matured recently and is worth quite a small amount of just under €27,000. I am 60 years old. I am self employed and had to cash in an earlier insurance scheme when I hit tough times. This is my only personal pension, apart from some limited saving with an SSIA.


When I took this pension about 15 years ago, I understood that I would get a lump sum on reaching the nominated retirement age. But now I discover that I can only get a quarter of the money, and that the rest has to go into an annuity fund.Here is where it all goes drastically pear shaped:

The 20,000 Euro that would go into an annuity fund would be worth a useless and miserable sum of approximately €1,100 per year. Hardly enough to buy the news papers! And basically worthless to me.

This miserable sum of €1,100 is guaranteed for my life time – but if I die the day after the contract is signed ALL the money is GONE – my wife or family get NOTHING. Brilliant deal is it not????? I am told I could get an arrangement that would pay to my wife in the event of my death but the annual payment would be even smaller again!

If I had the lump sum and put it into any decent investment, (the Banks are offering 6% on a special saving scheme just now) it would do a lot better than what is offered on this annuity thing, that just a joke!

The insurance company Standard Life tell me it is the Revenue Commissioner/ Government who are making these daft rules. I have written to several agencies but have not got any answer as yet.


The government are encouraging people to take out personal pensions. If I knew, when I took out the policy, what I now know, I would never have taken a pension in the first place. For absolutely sure, I certainly will not consider any further pension scheme while these daft rules apply.

The government are encouraging people to put their SSIA into a pension fund. I say what’s the point. You will not be able to get your hands on it. I would be far better putting into just about ANY savings scheme.

I am totally discouraged and very annoyed by having the goal posts shifted on my small personal pension.

Is there anything I can do about it or other option I can take - I feel like saying to the government you can stuff the €1,100 per year it is an insult.

It sounds to me like an illegal thing to force someone to put THEIR money into a poor return option.

Any advice or suggestions would be most welcome.
 
This appears to me to be a garanteed return of 5.5% which is not too bad.
You must also remember that you got tax relief on it when you put it in the fund.
Is it in any way index linked.
 
You don't have to take an annuity and you don't have to take the annuity with Standard Life.
 
Thank you for your replies and input. The points made are somewhat academic because amount paid out is so small as to be almost useless. It also means my wife gets nothing should I die. I do not see the point of this type of arrangement. Fair enough, if I had been able to afford to pay a heafty amount and the sum was 10 times as big, then the payout would be useful. I my case, because of my circumstances, it am being dealt a complete dud.

On the tax issue, all I saved is the tax at the lowest rate. I would hapily pay the tax and take the lump sum that maybe I could do something useful with.

As to the 5.5% guaranteed - I do not understand how you arrive at this. I have no financial knowledge whatsoever, but if I take 20,000, deduct 1,100 for the first payment, then add the 5.5%, it brings the capital back up to 19,939 again. At that rare of capital reduction, it would take a very long time to be exhausted.

As I said before, I am greatly frustrated by this arrangement, which was evidently thought out by well-off academic types, with no thought for the bottom end of financial ladder!

When you live a hand to mouth existence, money takes on a different perspective. It is not a comodity to play around with, but a means of survival.
 
I don't want to raise your hopes as I am not sure but ....

As I understand it you could receive 25% of your lump sum tax free and get the rest immediately as long as you pay your marginal rate of tax.

In order to do this you may need to put the money (75% of it) in an MARF and then take it out.

Someone on here should know exactly how this works?
 
Let this be a warning to all purchasers of financial products - if you do not fully understand what you are buying, then do not buy the product, hoping that it will be what you require.

Hopefully, the finance industry is doing a better job today than 15 years ago, so that fewer people will end up with product which do not met their needs.
 
jpd said:
Let this be a warning to all purchasers of financial products - if you do not fully understand what you are buying, then do not buy the product, hoping that it will be what you require.

Hopefully, the finance industry is doing a better job today than 15 years ago, so that fewer people will end up with product which do not met their needs.
Click to expand...


The product was generally OK, except that it did not reap much by way of profit due to the financial situation at the time.

Where the real problem lies is with the daft Irish Government rules about what happens to the mature lump sum. It is the politicians, and the hair-brained academics behind them, that most nees attention.

I would agree that many pension products are useless anyway. Bricks and mortar are far better investments if you can afford to invest in the first place.

Thank you Cameo for your constructive suggestions. Does anyone know if this would work??
 
The possibilities on maturity are set out in the policy documents - generally speaking the penalty for getting tax relief on the investment is restrictions on taking the benefits at the exit.

Just as well, as otherwise, there would be scope for massive tax avoidance - especially for the richer section of the community.
 
Michael,
I am confused with your posting.
As I read it:
  • You invested in a pension plan
  • You got some tax relief on contributions
  • You get 25% of the accumulated fund tax-free on retirement
  • The balance -75% -is used to provide a pension
What's the problem? It is a pension plan. It's objective was to provide you with a pension in retirement. The rules re 25% tax-free and balance to buy a pension were always there. Indeed since you invested 15 years ago the Government have relaxed the rules (for self employed and Company Directors) by introducing the ARF facility instead of having to buy an annuity.
The problem in your case seems to be the size of the fund and the resulting annuity. But that is a function of how much you invested over the period.
I cannot see that you were mis-sold. The option of taking the full fund in cash at retirement (whether tax free or taxed) was never an option. Blaming the Government for the fact that the pension plan must be used to provide a pension for you is daft. As for bricks and mortar.......well hindisght is 20/20.
 
Hi Conan, Perhaps you are correct in much of what you say. However, I was completly unaware of the rules, I am what amounts to being financially illeterate, and I was not properly advised. I was fully sure I was getting a lump sum which I could put into some saving scheme or whatever.

The second point is that the payment is just about useless at €1100pa. What the heck good is €21.15 per week now. How much less in five years time with inflation?

I just simply feel cheated by the system, and not a little depressed that my best efforts, in maintaining some pension payment during hard times, have come to realise so very little.

I feel like I have fallen through another one of those gaping holes in legislation.
 
MichaelAnton

Having spoken to someone I believe it is possible to go for the taxable cash option (i.e. pay tax on 75% of your maturity value and have access to the cash immediately) provided you can show that you have a guaranteed income of c. €12K p.a. (which can includes the state pension)

Not sure if this is useful for you
 
Thanks you Cameo. I will investigate the option you outlined. If I can do this i would be happy. The drip-feed that an annuity offers is just plain useless. Some bit of cash in hand may set a wheel or two turning. We live in hope!!
 
MichaelAnTon said:
...the payment is just about useless at €1100pa. What the heck good is €21.15 per week now. How much less in five years time with inflation?

I just simply feel cheated by the system..

...I feel like I have fallen through another one of those gaping holes in legislation.
Click to expand...

Michael

How much did you pay in to the pension? Without knowing how much you paid in, it's impossible to say whether you were indeed "cheated by the system" or whether you just didn't contribute enough to get a meaning ful pension.
 
Hello Sherpa,

Basically I was poorly informed regarding the outcome of the pension. I understood that I would receive a lump sum. That type of pension is not practically useful unless you have a fund of at least 100,000 or more in it. The best I could manage came to 27,000.

I believe people like me who cannot afford fairly substantial input to a pension fund would be far better off putting their money into a saving scheme.

The problem is this: would you prefer 20,000 euro into your hand or 21 euros per week. Esentially the 21 euro per week is so small as to be almot useless in any real terms. Five or so years into the annuity it would be less than a childs pocket money.

This pension is my ONLY pension. I do not have any other pensiojn or savings, excepting for an SSIA to which I have paid about half of the allowed amount.

20,000 I may be able to do something with. 20 euro per week is not a great deal of practical help.

Do you understand now?
 
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