Maturing pension / Buyout Bond at age 50: two options, annuity versus ARF versus lump-sum

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Protocol

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Person coming up to age 50, currently employed in public service.

Previous DC pension from previous employment is currently in a Standard Life Buyout Bond. Value is 48k.

Person wants to get access to some cash, as far as I know, and has been presented with these two options by Standard Life:


(1) Max lump-sum = 33.3k plus balance 14.7k which must be used to purchase annuity


(2) Max lump-sum 12k, and balance of 36k which may be placed in ARF, or purchase an annuity, or taken as taxable lump-sum


I welcome any comments.

Option 1 gives the most cash now, which they intend to put into AVCs going forward.

But option 1 will surely involve a very low annuity?
 
Protocol said:
Person wants to get access to some cash, as far as I know,
I welcome any comments.

Option 1 gives the most cash now, which they intend to put into AVCs going forward.

But option 1 will surely involve a very low annuity?
Click to expand...
Surely it also depends on how much cash they're looking to access right now? But are you saying that the reason that they want access to cash is to then put it into AVCs?
 
There's a clear trade off here. Bigger tax free lump sum but the remainder will give a paltry annuity for the rest of their life. Versus a lower lump sum but the ability to draw down the remainder as they will and even exhaust the fund in a tax efficient manner in the future.

The person needs to decide which one suits their circumstances the best.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
I'm not sure why someone would cash in a pension now simply to invest in AVC's. But if they just want cash now, it would depend on how much really.
An annuity from 14k at age 50 will be pretty useless, however, if they have a decent public service pension to look forward to, it's not going to matter that much in the long term.

So, How much cash do they need ? If less than 15k, option 2, if greater than 15k, option 1
Do they really only need it to purchase AVC's ? if so, I wouldn't bother.
 
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