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Lump sum or take the monthly Pension?

montycat_2
montycat_2 Posts: 399 Forumite
Part of the Furniture Combo Breaker
in Pensions, annuities & retirement planning
Hello,
I am a new Widow with 3 young children and ,my deceased husbands pensions (bits and pieces accrued over years) are offering me a lump sum or ,a monthly pension for life.
I just wondered what would be the best to do .
One is a lump sum of £2000 or yearly pension of £108.00 .
Another is a monthly payment of £52.00 or a £14000 payment in to another pension for me.
advice welcome please
«1

Comments

  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
    Hello montycat,

    Very sorry to hear about this tragedy.It must be even more distressing to have to try and cope with things like pensions at this time. :(

    Can you post some more details about the pensions? Are they company pensions or with life assurance companies?

    Do you know the value of each pension fund, for instance?

    Do you already have a pension of your own?
    Trying to keep it simple...;)
  • dunstonh
    dunstonh Posts: 120,158 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Some of the information you have posted doesnt seem quite right. A bit of clarification is needed.

    Depending on type of pension and how its made up, if your husband died before commencement, one of the more common options with personal plans is usually pay the fund value to you. This does not need to buy another pension. Indeed, that would be a different transaction altogether and would be subject to your eligilibilty.

    We need to know a little more about the type of pension it is though as different plans have different death benefit arrangements. Can you post some info on the plan

    The important thing is do not rush into anything at this stage.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • montycat_2
    montycat_2 Posts: 399 Forumite
    Part of the Furniture Combo Breaker
    Hi,I will find the letters sent and post more when I have them in front of me .Thanks for your replies.
  • montycat_2
    montycat_2 Posts: 399 Forumite
    Part of the Furniture Combo Breaker
    Ok here are the details of the 2 I have!
    1/ Scottish Widows-scheme name -PI Holidings PlcOptions available to you are 1/pension of £637.20 pa pain in monthly installments for life .this is was not occupational.
    2/Open Market option of £14957.61 (£885.96Non -protected rights,£14071.65 protected rights)This fund maybe taken to another pension provider to purchase an annuity with them.

    2/Paymaster-pension of £120.84 per annum -as it is small can be paid as a one off cash sum.£2209.08Occupational Pension.
    I have tried to use the wording as written in the letters.

    does this clarify things more?I'm confused.
  • nearlyrich
    nearlyrich Posts: 13,698 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker Hung up my suit!
    I am not an expert but with the 2nd pension if you live for more than about 18 years you would get more from the fund by taking it monthly than if if you take the lump sum.

    Pensions are a minefield for most people, hope that you get it all sorted soon.
    Free impartial debt advice from: National Debtline or Stepchange[/CENTER]
  • oceanblue_3
    oceanblue_3 Posts: 199 Forumite
    Part of the Furniture Combo Breaker
    Hello montycat

    (1) Scottish Widows - it sounds as though this must be taken straightaway because it is made up mainly of Protected Rights. The only question is whether another company could give you more income than Scottish Widows have quoted. This where the term "Open Market Option" comes from - you have the option to offer the business to the whole marketplace.

    (2) Paymaster - I would take the lump sum rather than the annual income, mainly because the annual income is so low, and is likely to be taxed. However, it could be an index-linked-pension, rising each year by RPI; perhaps you could look into this?
    oceanblue is a Chartered Financial Planner.
    Anything posted is for discussion only. It should not be taken to represent financial advice. Different people have different needs, and what is right for one person may not be right for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser; he or she will be able to advise you after having found out more about your own circumstances.
  • dunstonh
    dunstonh Posts: 120,158 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Protected rights was the magic word in the Scot widows side. Thanks for clarifying that. Refer to oceanblues post for the answer.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • montycat_2
    montycat_2 Posts: 399 Forumite
    Part of the Furniture Combo Breaker
    What are " protected Rights"?
  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
    Montycat
    montycat wrote:
    What are " protected Rights"?


    You may well ask ;)

    When you pay National Insurance contributions, this entitles you to two state pensions - the basic state pension and another earnings-linked one formerly called SERPS (State earnings related pension scheme), now called S2P (State 2nd pension).

    However it is possible to "contract out" of the second one, which means that you will get a rebate of part of your NI contribution into a private pension at an insurance company.This pension is called a "protected rights" pension and is subject to different rules from an ordinary personal pension.

    From April next year the rules will change, bringing the protected rights pension in line with normal personal pensions ( for instance you will be able to take 25% of a PR fund in tax free cash, not currently allowed).You should check if it's advantageous (or possible) to wait until next year to activate this pension.
    Trying to keep it simple...;)
  • montycat_2
    montycat_2 Posts: 399 Forumite
    Part of the Furniture Combo Breaker
    I think I understand !
    So many things I need to think about .
This discussion has been closed.
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