We'd like to remind Forumites to please avoid political debate on the Forum... Read More »
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Pension, bigger lump sum
Options

wilfy007
Posts: 4 Newbie
Hi,
I have the choice of annual pension and lump sum or bigger lump sum and smaller annual pension. I have no idea which would benefit me the most, any ideas would be appreciated.
I have the choice of annual pension and lump sum or bigger lump sum and smaller annual pension. I have no idea which would benefit me the most, any ideas would be appreciated.
0
Comments
-
Im sure people with more info than me will come along and help but I can only go by my own experience.
I was always told to take as much lump sum as you possibly could as
A. it wasnt taxale
B. Foregoing the lump sum and taking a larger pension it would be taxable depending of course on any other income you had.
Its all a gamble anyway, depends on how long you think (ha ha) you are going to live to receive your pension.make the most of it, we are only here for the weekend.
and we will never, ever return.0 -
I have the choice of annual pension and lump sum or bigger lump sum and smaller annual pension.
In general, as a very rough guide if the extra lump sum is less than about 15 times the annual pension foregone it isn't a good deal. More than 20 times, then it is well worth considering in more detail. 15-20 times and it may or may not be worth it.
There is a lot of detail to take into account to assess the value, eg, presence of a spouse, age, ill-health, financial requirements, level of indexation and any caps on uprating, etc.I was always told to take as much lump sum as you possibly could as
A. it wasnt taxale
B. Foregoing the lump sum and taking a larger pension it would be taxable depending of course on any other income you had.
Taking the maximum lump sum is generally correct for a Defined Contribution pension, but it is far less clear for a Defined Benefit pension.
The terms of exchange of pension for lump sum can be so poor that you would better off not taking the tax-free cash, and instead choosing taxable income instead. It all depends on the commutation rate offered.0 -
I don't need it financially, it's a very small pension. Annual pension £1750.14, lump sum £3892.91 or annual pension £1333.64, lump sum £8890.91. OK healthwise (I think).0
-
I don't need it financially, it's a very small pension. Annual pension £1750.14, lump sum £3892.91 or annual pension £1333.64, lump sum £8890.91. OK healthwise (I think).
So that is an offer of giving up £1 of income for £12 of lump sum. Sounds like a public service scheme?
Given you don't need the money, I'd be taking the higher income every time.0 -
Thanks, I think I'll go with the with the higher income.
Much appreciated0 -
Annual pension £1750.14, lump sum £3892.91 or annual pension £1333.64, lump sum £8890.91.
BLB0
This discussion has been closed.
Confirm your email address to Create Threads and Reply

Categories
- All Categories
- 351.2K Banking & Borrowing
- 253.2K Reduce Debt & Boost Income
- 453.7K Spending & Discounts
- 244.2K Work, Benefits & Business
- 599.2K Mortgages, Homes & Bills
- 177K Life & Family
- 257.6K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.1K Discuss & Feedback
- 37.6K Read-Only Boards