Annuities

[Inyourhippyhat]

I have two pension pots. One private, into which I pay from my salary every month - this forms 85% of the total. The other is an occupational pot, non-contributory, paid into by my employer every month.

The amount paid out by pension annuities is approx 1/3 of what it was before the financial crisis hit. I just feel I am throwing money away as rates are not projected to rise.

I am 60 and will retire in 4 years time. Due to the general increase in cost of food, insurance, wanting to help my daughter out at university etc etc I can now ill afford to keep paying into the private pension and am thinking of stopping the monthly payments in order to leave the pot as it is until I retire.

If there are any pensions/annuities experts out there what do you think? My IFA advises me not to stop paying in but she would, wouldn't she because she sees an effect on her fees.

Any thoughts from any of you in a similar position or who have expertise in this area?

Thank you

If you are saying you can't afford paying into the private pension because you need the money for something else today then that's a fairly compelling reason to pay in less. However, be realistic about how much you are likely to receive from your occupational, private & state pensions if you stopped contributing before deciding. Four years is a fairly long time in financial terms, the future is by no means a done deal, and today's annuity rates may not reflect those when you eventually come to retire... higher or lower. Pension funds may not have been performing that well but savings are making next to no interest at the moment either. And, of course, private pension contributions earn tax-relief of 20p in the £1 (more if you are a higher rate taxpayer) which savings don't.

I think, when it comes to retirement planning, you have to look at the whole picture i.e. your assets, property and cash savings as well as pensions and investments, because diversity will protect you from any one element failing.