Pension and Lump Sum

dhj

I may be in the position shortly of being able to take my pension and lump sum. I read somewhere that it is better to take as much lump sum as possible, even reducing your pension in exchange for cash. Can anybody confirm this and if so, why is it seen to be a better deal?

CLAPTON

obviously it depends upon the numbers and other details. (index linked etc etc)

dhj

Thanks for the prompt response. I'm not sure of the figures yet but lets say £10k per year (index linked) with a lump sum of £30k.

dunstonh

I read somewhere that it is better to take as much lump sum as possible

That ceased to be a rule of thumb after April 2006.

There is no one-size-fits-all answer any more as personal taxation, personal circumstances and the terms of the lump sum and income (e.g. commutation rate etc) can all have an impact.

dhj

Thanks very much for the prompt response. Looks like I will need to take advice when I receive the official figures then :eek:

CLAPTON

dhj wrote: »

Thanks for the prompt response. I'm not sure of the figures yet but lets say £10k per year (index linked) with a lump sum of £30k.

I'm not sure what you mean...

Presumably there are two situations that you are trying to compare...

1. assuming you make the max pension and no lump sum and
2 assuming you take a smaller pension and a lump sum

would you have other income ?
do you have other savings/investments?
what would your tax position be
what age are you
do you need cash now?

dhj

Clapton, thanks again for the response. All I am trying to do is get the best possible financial deal out of the figures offered. So, aged 55, no other income (but would look for another job), a few 000's savings (but no debt or mortgage), don't need cash but do need an income (so perhaps invest the cash?)

CLAPTON

dhj wrote: »

Clapton, thanks again for the response. All I am trying to do is get the best possible financial deal out of the figures offered. So, aged 55, no other income (but would look for another job), a few 000's savings (but no debt or mortgage), don't need cash but do need an income (so perhaps invest the cash?)

but what is the deal ?

Andy_L

Is it a money purchase pension or a final salary pension?

zygurat789

And how is it indexed? 5%pa, linked to RPI, or other.

dhj

It's a final salary pension indexed linked (I believe to 5%)