tax free cash

Hi bobsleigh,

As the other previous respondants to this thread have said, you really need to sit down with an adviser on this one as your circumstances will be specific to your own private situation and any comments on here will probably be too generic.

If I can hone in on just one area for instance. Both cyclonebri1 and jack spratt make valid points in respect of any survivor’s death benefits BUT we don’t know, for example, if you are married, single but cohabiting etc. All we know is that you have a partner. Is your partner opposite or same sex for example - as this could make a difference too? If married, when? Is she near her Normal Retirement Date or has the offer been made as ‘early payment’?

As Jack Spratt points out, some defined benefit schemes provide a spouse’s pension ‘pre commutation’ and this might be important to you. Just to clarify here's a simple example:

Example 1
Unreduced spouse’s pension:

Pension only
Scheme pension £15,000 p.a. with surviving spouse’s pension of (say) 50% i.e. £7,500 p.a.

or

Cash lump sum and unreduced spouse's pension
Cash lump sum of £36,000 plus scheme pension £12,000 p.a. with surviving spouse’s pension of (say) 50% i.e. £7,500 p.a.

You can see that in this example that the spouse’s pension has NOT reduced – even though the lump sum is taken.

Example 2
Reduced spouse’s pension:

Pension only
Scheme pension £15,000 p.a. with surviving spouse’s pension of (say) 50% i.e. £7,500 p.a.

or

Cash lump sum and reduced spouse's pension
Cash lump sum of £36,000 plus scheme pension £12,000 p.a. with surviving spouse’s pension of (say) 50% i.e. £6,000 p.a.

Summary
Scheme Rules are wide and varied and what I've attempted to demonstrate in the above example is that there are other factors to be considered, such as the date you were married or started cohabiting, the dates of pensionable service, if cohabiting are you financially interdependent (as this may have an effect on whether you would be entitled to any survivors beneft) and the above is just one example.

Here’s a Factsheet - 10 reasons why you may not want to take that cash lump sum

If you care to expand on your situation we may be able to provide more specific answers.

Note, it isn't complicated - but it does require prior knowledge - otherwise you, or your partner may lose out without ever knowing what was available.

I hope the above helps a little.

Mike Jones

I work in the field of Pension Education and Pension Guidance in the UK. I am a current member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.