Lump sum, take it or leave it?

keith_parke

Hi Victors Bruvver,
I am in roughly the same boat, ie lump sum or not.
Dunstonh recently replied to a thread which I posted, advising of taking the lump sum. He also stated that you could expect roughly 5% net on the investment.
I was in the fortunate position recently of being able to speak to a financial advisor who advised me to take the higher pension due to tax implications on investment return. I am still therefore undecided in my case.
As most cases have individual characteristics, I would certainly take professional advice.

kenshaz

Well that was not really rocket science to state that you would get approx 5% ,just compare the best available rates to the BOE base rate ,obviously that is what you would get.

kenshaz

keith_parke wrote:

Hi Victors Bruvver,
I am in roughly the same boat, ie lump sum or not.
Dunstonh recently replied to a thread which I posted, advising of taking the lump sum. He also stated that you could expect roughly 5% net on the investment.
I was in the fortunate position recently of being able to speak to a financial advisor who advised me to take the higher pension due to tax implications on investment return. I am still therefore undecided in my case.
As most cases have individual characteristics, I would certainly take professional advice.

I think you need to look at your own personal circumstances ,no one knows you better than you.

kenshaz

Paul_Herring wrote:

It's the weekend - he can't be expected to be on here 24-7

I have heard that whambamboo would like to discuss a previous post.

EdInvestor

Nobody can say much to help the OP until he provides more info about what type of pension he has and what deal he's offered on the lump sum, including the figures.

kenshaz

But we can talk about our personal experiences ,can we not?

dunstonh

Individual circumstances can sometimes lead to the full income being taken. Guaranteed annuity rate being a common example or the income being much higher than the lump sum can generate.

5% is taken a guideline figure as it has always been achievable. There is a product out currently that guarantees 5% net for life so whilst investment returns do come into it (which could lead to more than 5%), there are options which have guarantees as well.

If you dont take the lump sum, when you die, the pension income will either stop altogether (single life annuity with no spouse option being the most common annuity purcased). That leaves your spouse without a penny. If you have taken the lump sum, the spouse has access to that lump sum as well.

Dunstonh recently replied to a thread which I posted, advising of taking the lump sum. He also stated that you could expect roughly 5% net on the investment.
I was in the fortunate position recently of being able to speak to a financial advisor who advised me to take the higher pension due to tax implications on investment return. I am still therefore undecided in my case.

Was that a company pension or a personal pension?

Personal pensions are rarely best taking the full income. Even if you want to buy an annuity, you would take the 25% and use that towards a purchase life annuity rather than the pension annuity.

Obviously, we dont know your circumstances but it is unusual for someone to use tax as a reason not to invest and take the income. After all, the income is taxable as well and the 25% can be used by spouse if the income is "lop sided".

prudryden

Dun - What if it is a "Final Salary" scheme? What would you need to know?

dunstonh

With Final salary its actually quite easy from a monetary point of view as you can see exactly what you are giving up in income by taking the lump sum. You are given the income figures with and without lump sum taken.

So, you can look at the difference and then work out if that lower income can be made up by investing the lump sum.

Then you can bring in the opinion areas such as is it better to have the lump sum in your hand or not. Remember that capital expenditure will still be need in retirement. Its not all about income. Boiler replacing, new car, decorating, repairs etc.

kenshaz

My situation was that I have a final salary pension,choice was 1/2 final salary+lump sum or 2/3 final salary no lump sum --also if I died my widow would not get half of my 1/2 final salary but 1/2 of the 2/3 final ,irrespective of the fact that I opted to take the lump sum .So that was a plus in addition to bird in the hand ,I state because some readers might be in a similar government scheme and it is a point to remember.

The considerations that must be made as an individual are ,have you additional savings and are you mortgage and debt free,and your ability to maintain your standard of living,with half final salary .