Lump it or leave it?

brasso

MABLE wrote:

There is a time to be serious and a time to be humerous and as you had nothing constructive to add it would have been better to have kept your words to yourself. The action the original poster takes now will have an impact on his financial future and silly inmature remarks are no help to anyone. Just my thoughts of course!

Forgive me MABLE, but I'm going to rush in to defend Cardew's reply. :eek:

In fact, I thought his contribution was exellent as it made a strong, and totally legitimate point by using a spot of humour. I was actually starting to formulate a reply to the OP in my mind by asking myself what I would do in his position, when Cardew's post made me realise that I would be largely wasting my time. We could offer advice to the OP if we made a series of assumptions about our longevity and prevailing economic conditions. We could then adjust those assumptions and offer a totally different piece of advice. Both might be perfectly good pieces of advice, but completely different, based on the differing assumptions. Thanks Cardew.

The best advice we can offer is pretty neutral, and a bit of a cop-out, that the OP should see an IFA where he could lay out his current financial position in much more detail than he would want to on a public forum. My instincts say that taking the lump sum now and sacrificing the pension would be a bad idea, or at least a very last resort, but my instincts are based on no detailed knowledge of the OP's circumstances, nor of any of those unpredictable variables mentioned by Cardew, and therefore quite probably useless.

wotsthat

I don't think the remarks were immature - where can I get some of the crystal balls!

Of course Eck has some tough decisions to make but it's not simple. If Eck decides to take the lump sum now, and the reduced pension, and dies when he's 102 then, with future hindsight, it may have been financially better, or not, to have waited until 65 to take the pension. On the other hand there's no guarantee that he'll make it to 54 let alone 65 so maybe he should pay off debts now and relax.

Clearly Eck's business isn't doing so well which must must be stressful. Maybe being able to pay off debts now will help to reduce stress and, who knows, avert a heart attack etc. It's not all about money and who knows when the Grim Reaper is going to visit? Taking the lump sum will allow Eck to pay off debts and maybe take a holiday or two - he won't be wanting to take foreign holidays at 102 so why not take a couple now instead?

It's worth paying for some decent advice because if, and I don't know if it's worthwhile, the pension can be transferred to a sipp the lump sum can be taken without the need to take a pension straightaway thus giving the fund chance to grow further before retirement.

There's some that might say it's worth taking the lump sum now AND the reduced pension so that the maximum sum possible can be extracted before Grim visits. In my view this is only worthwhile if you are taking the pension to invest outside of a normal pension wrapper and don't need the money now.

As Cardew points out though most of the facts that would point you to the best path (100% guaranteed) are unknown and so at best it is about understanding the odds and at worst it's a complete gamble.

I hope it works out whatever route is chosen.

dunstonh

Cardew's response is fine and reference to crystall balls indicates quite simply that a lot of it is unknown. It leaves you in no doubt that it is guesswork.

EdInvestor

Isn't what they are offering me within normal rules for taking a pension early?

There are no hard and fast rules, they canm offer you what they want.

Ask them what the "commutation factor" is. This number refers to the rate at which they are turning a pension income year into cash.

12-13 is fairly normal (though not generous). 15-16 is good. Single digit is very poor.