Full pension or reduced with pension with lumpsum?

shown73

Thanks for replies. In my case, I have a modest company pension to come next May, i.e. after "A" day, of about £6500. Although there have been very modest rises, it is not index linked, but on the other hand, on my demise, spouse would receive uncommuted value. I think that the ratio is 9to 1, which doesn't seem to good, and at the moment the maximum lump sum would be about 24000. Apart from that, I only have oap, and a bit of serps. No mortgage though, at least
The other thing that I would just like to say is that I have noticed the same names appearing, giving advice. While there may be detail disagreements, I think that we should all be grateful to you guys, or gals, for giving your time and expertise. Those very disagreements mean that we are being offerred a spread of advice that would cost a small fortune normally. I for one, am extremely grateful.

CM58

I'd just like to echo what shown73 says above. Thanks all for the imput in to this thread it has helped greatly in coming to a decision.

deemy2004

You can take the lump sum and put it into cash & Shares ISA's (you could purchase goverment index linked stock in the shares isa part).

£7k this year, and £7k from March.

That way you can draw on the money as and when you need it without worrying about out living any annuity and also all income is taxfree on the savings ISA + bond interest.

erb

Click here for an article from Citywire that suggests most people in occupational pension schemes are being ripped off if they take a lump sum rather than pension. But it all depends on the particlar figures in each case of course.

Thanks to dunstonha edited. See his following post.

dunstonh

erb wrote:

Click here for an article from Citywire that suggests most people are being ripped off if they take a lump sum rather than pension. But it all depends on the particlar figures in each case of course.

Thats not quite the same thing though as it applies only to final salary schemes. With "A" day, a number of schemes may be revising their rules.

sylblake

Husband due to retire at 58 this month. Option of £20,000 lump sum or extra pension of £1545 pa. I would get 50% if he died before me.

We had intended to invest £20,000 in Ing a/c or something similar but after reading previous posts are undecided. We now think it may be a better option to take the extra pension as it is index linked.

Any thoughts would be appreciated. Many thanks.

EdInvestor

Has anyone looked at the tax angle? While taking the pension could be a better deal in re spouse pension and (especially) index linking, it is taxed, whereas the lump sum isn't.

dunstonh

whereas the lump sum isn't.

Depends on what you do with the lump sum. If you stick in the bank, then you may as well have taken the increased pension. If you invest it in a tax efficient manner for capital purchases later in retirement, then its better taking it.

It may well be a little better taking the increased income from the pension. However, you must remember that there will be capital purchases required throughout your retirement. Cars will only go on for so many years without being replaced. What about all those holidays you can do before you die? House will need periodic expenses where capital is needed.

EdInvestor

However, you must remember that there will be capital purchases required throughout your retirement.

True, but equity release may now be an alternative to cover that.BTW I see that interest rates are now coming down in that area and they are talking about remortgaging opportunities now arising.

I would recommend taking some advice, but the trouble is that so many salesmen will just say "take the lump sum" because they want to flog the punter an expensive high charge investment bond.

dunstonh

I would recommend taking some advice, but the trouble is that so many salesmen will just say "take the lump sum" because they want to flog the punter an expensive high charge investment bond.

Please ignore this comment. Ed is an inexperienced, low knowledge contributer to the forums who posts are made mainly to snipe at the financial advisors. Just a few months ago it had to be explained to him the workings of life funds. Yet he has made this sort of comment a number of times before and after. He relies on sensationalised media articles for his information. These always focus on the worst cases. Ed lives in a world where everyone, from every profession are like those shown on Watchdog.

FYI, investment bonds, when used correctly can reduce significant tax liabilities and stop your age 65/75 age allowances being reduced. Nowadays they also have access to most of the best unit trust funds out there and charges can often be significantly lower than investing in the unit trust itself. Some of the better examples can have no reduction in yield over 5 years and just 1% over 10 years. This can beat non-advice unit trust/OEIC funds. Like any retail product in any area, there will also be some pretty poor versions too.

We are not in a position to know what your status is and whether or not a bond is appropriate or not. However, Ed's comments do more damage than good, as per usual.