DH listening to "general wisdom!"

elona

IF DH retires this year he will get a final salary pension scheme which is index linked and if God forbid anything happened to him a 50% spouse pension.

He is now enamoured of the idea of taking a lump sum and a smaller index linked pension!:mad:

We will have savings so it is not as if we need the lump sum and I think it would be stupid to reduce an index linked pension!

The only reason DH has for considering this is because "everyone does it" or "that is the advice they have always given!"

Have pointed out that the advice was given when interest rates were about 7% - now they are around 2% the situation is very different!

We still have AVCs to consider and I would not mind so much if he took a lump sum from those.We would not qualify for the State pension for another three years and still have a school age daughter and another who has yet to finish university.

Have also pointed out to DH that "everyone" thought the Titanic was unsinkable etc.

Has anyone any thoughts on our future position?

dunstonh

The only reason DH has for considering this is because "everyone does it" or "that is the advice they have always given!"

Everyone had slaves hundreds of years ago but you dont see it now.

There is no general rule of thumb any more. Rule changes in 2006 and personal circumstances and modern options and alternatives along with personal risk profile and taxation mean that it may or may not be best to take full lump sum or not.

Also, work place or friends "advice" is very often incorrect, obsolete or based on assumptions which may or may not apply to everyone else. Usually started by an opinionated Daily Mail reader who thinks they know it all.

EdInvestor

elona wrote: »

IF DH retires this year he will get a final salary pension scheme which is index linked and if God forbid anything happened to him a 50% spouse pension.He is now enamoured of the idea of taking a lump sum and a smaller index linked pension!:mad:

This might be a sensible move for tax reasons.It depends on how much the pensions are.

Have pointed out that the advice was given when interest rates were about 7% - now they are around 2% the situation is very different!

They won;t be @2% for long, and anyway perhaps he plans to invest some of the money for a higher return.

We still have AVCs to consider and I would not mind so much if he took a lump sum from those.

It is sometimes possible to amalgamate the f/s pension and the AVC together and take the entire lump sum from the AVCs in cash, not touching the index linked pension.This is obviously an excellent deal if available: not all schemes allow it though.He should check.

Has he checked the position with the spouse pension? In some schemes the spouse pension remains the same regardless of whether the member takes the money wholly as pension, or a mix of pension and lump sum.

We ... still have a school age daughter and another who has yet to finish university.

This in itself suggests that you might have a need for more ready cash.

What is your own situation re state pension/other retirement income?

shaunrc

Hi elona

Firstly I am an IFA but please do not take this posting as advice as that has a specific meaning for someone like me.

I think that you should take a fresh look at your circumstances and get some advice partly for the reasons Ed and dunstonh have given but also for 2 others.

Firstly I look at a lot of these type of schemes and on average people usually undervalue the true worth of an index linked pension. Think how many years he ( and then statistically you) are likely to live. Even iwith the experience of the last 10/15 years when inflation has been lower this is very valuable. Put another way if you buy an annuity on the open market that is linked to inflation it is expensive.

Secondly you need to look very carefully at the "exchange rate" between pension and lump sum. Many schemes have a rate that is unfavourable to the lump sum and particularly in a case where you have other cash might lead you to maximising the pension rather than the lump sum.

It is a big decision please look into it and consider it carefully.

elona

Thanks for the input everyone.

In about three years both of us get the State pension and I get a small civil service one as well.

The index linked pension (also a final salary scheme), if he takes it this year (while it is still around) should not be an awful lot less than he gets now after tax, NI, AVCs and pension contributions.

We have good savings and should be able to continue to fund DDs education.

The spouse's pension, if something happens to DH, is half his pension.

His family usually live to their eighties and DH wants to get to a hundred.

I will have to keep badgering him to find out more real information and to see if he can get professional advice.

As he prefers to believe almost anyone that spouts forth - this should be fun!!!!!