Which Voluntary Redundancy Option should I chose?

BREEZE

After several years working for the civil service I have received the dreaded 'voluntary redundancy offer'. Now, what do I choose?

Having read lots of blogs I consider myself fortunate to be in a pension scheme. I was 50 this year which means I was offered the option of taking some pension. Here are the options:

Option 1
Voluntary redundancy compensation payment £46400
Deferred pension at age 60 £8243
Deferred lump sum at age 60 £24730

Option 2
Voluntary redundancy compensation payment £46400
Reduce Pension £5036
Reduce Lump Sum £17657

Option 3
Use my voluntary redundancy compensation payment to ‘buy out’ ie pay me an unreduced pension. The total buy out is over £72000 so my employer will pay the difference
Unreduced pension £8243
Unreduced lump sum £24730

Currently, I favour Option 3 as I don’t need lots of cash to pay off debts but I will have some money to cover any urgent repairs to my home etc and I will have a regular monthly income to pay bills if I cannot find work. Can anyone suggest why should I consider another option?

daisyf_2

good pay outs - much more than I had and I have just made redundant
- well done xx

Andy_L

With option 2 & 3 is the pension paid from now (ie 50) or 55?

BREEZE

the pension is payable from now, ie 50. For the quotation my employer has used a calculation date of 30 September 2011

Peelerfart

Please correct me if I'm wrong,under option 1 they would give you £71K and a pension of £8,243 when 60.

Assuming this is correct you then have (put very simply) 10 years at £7K a year until you reach pension age,
if it is not your intention to retire then you wouldnt need much of a job to bump your money up to a decent wage.

I wouldnt dismiss option1 personally

dianasnan

Do you have the option to take your pension at say 55 which would reduce the actuarial reduction of 5% per year by quite a lot.

If you could use the redundancy payout towards living expenses then in 5 years time you would still get the pension lump sum and your pension but not so reduced as in option 2

Just a thought.

skizeewoo

remember you will have to pay tax on your lump sum, we were told on anything over 30K (redundancy not pension) we have just received this as well :-(

Jarndyce

I would strongly advise you to take independent financial advice from a qualified IFA who can look at your personal finances and advise independently which option is best for you in your circumstances.

If you are in a union (if not why not?) they will have preferred advisors free of charge but you should in any case be able to get this free on the High Street - even from your bank if they sense a big deposit coming their way, but be wary they will try and sell you their products and push their savings facilities.

The_Thrilla

BREEZE wrote: »

After 25 years working for the civil service I have received the dreaded 'voluntary redundancy offer'. Now, what do I chose?

Typical civil servant. Can't make a decision.

BREEZE

I just like to have all the facts first

EconomicsGirl

Option 3 looks clearly the best one to me. I'ld do calculations based on your expected life expectancy - I did 75 and option 3 was clearly the best. Redundancy is tax free up to £30k, pensions are taxed but I beleive the lump sum is tax free though I'ld check all that. If it were me I'ld go for option 3.