Retirement pension options.

tuggy12

Another item to take into account is the strength of your pension scheme funding.
Is the scheme fully funded and is it likely to remain that way?
If, before you are 65, the scheme becomes underfunded to the extent it has to be rescued by the PPF, then your penion will be immediately cut by 10% and frozen. After age 65 the pension will not be cut but will be frozen at that time.

If your pension fund is strong and well funded and looks secure for the future, then the higher pension looks like the best bet..
If there is any doubt about the longevity of the fund then I would seriously consider taking the lump sum and smaller pension.

lilac_lady

I would take the lump sum. It'll give you a cash cushion and can be passed to your family your death, unlike your pension. Unless you've spent it, of course. If your health is good you may want to take another job, even part time work. The lump sum would be tax free.

MrMicawber_2

The key phrase from lilac_lady is "unless you've spent it". If you can afford to live on the reduced pension and not tap into the lump sum that is fine. If you need all the income you can get then your lump sum will slowly and steadily erode away, probably to 0 after about 20 years or so. At this point you are therefore left with a much reduced pension and no lump sum.

It would of course be much easier to plan if we could choose the date we were going to die - and then stuck to it.

When I get around to the same decision in a couple of years time the frst thing I intend to do is to double check what income I need to live on, identify what will give me the best protection against inflation and make my decision based on this information. I am also in a final salary pension and I am not going to play roulette with my life expectancy versus a liveable income.

I also don't want to be in the position of having to work to have a half decent income until I eventually keel over.