Lump sum and pension credits

A_Ross

Retired in ill health age 61. Wife is 60. We own our house and the only expense is council tax, insurance and maintainance. Wife gets £45 per week from state and works pensions. I had a final salary pension from a job I finished in 1996. The pension offer for me is a lump sum of £18000 and a pension of £5300 or no lump sum and a pension of £6400. Either option would see us having to apply for pension credits.

I was contracted out of SERPS but don't know for sure how that affects things. A check with the state pensions got me an estimate of £99 pw at 65 but they stated that could change depending on whether I was contracted out

We have savings of £5700. If we took the lump sum we could still get some pension credits. We could use some of it for repairing and modernising our heating and insulation as well as replacing our 12 yr old car with a newer one. The difference in pensions is relatively small when pension credits are available. It seems obvious that the lump sum would be the best option but are there any pitfalls?

I also have a smaller pension to claim that would give us a £550 lump sum and £66 per year or take the whole lot as a lump sum of £1890. If I took the large lump sum from the works pension I believe I would be running foul of IR rules.

I really need to make a decison soon because we are now living on savings and my wife's pension

jancee_2

The people at Pension Credit will be able to tell you what your entitlement might be in any given scenario.

0800 991234

A_Ross

jancee wrote: »

The people at Pension Credit will be able to tell you what your entitlement might be in any given scenario.

0800 991234

They have a calculator that gives the pension credit when different values are entered. Rules on deprivation of capital and other benefit entitlements are not handled.

EdInvestor

A_Ross wrote: »

Either option would see us having to apply for pension credits.

But not perhaps once you get to age 65, when your wife's state pension will rise to 60% of yours and your own total pension income with be somehwat over 10k..

I was contracted out of SERPS but don't know for sure how that affects things.

It means you won't get any S2P.

A check with the state pensions got me an estimate of £99 pw at 65 but they stated that could change depending on whether I was contracted out..

Sounds right - the full basic plus some Graduated pension from the early 70s.

We have savings of £5700. If we took the lump sum we could still get some pension credits.

In the budget the amount of savings disreagrded went up to 10k, which will help.

We could use some of it for repairing and modernising our heating and insulation as well as replacing our 12 yr old car with a newer one. The difference in pensions is relatively small when pension credits are available. It seems obvious that the lump sum would be the best option but are there any pitfalls?

Looks sensible to me.Apart from your capital spending needs it will also provide some leeway until your extra state pension income kicks in at 65.

I also have a smaller pension to claim that would give us a £550 lump sum and £66 per year or take the whole lot as a lump sum of £1890.

Unlikely to be allowed, as you are over the trivial commutation level with your other pension.

A_Ross

Thanks. That has just about answered my questions and with answers from another forum I can now make a more informed decision