Help! Can we ask for lump sum instead?

kelloggs36

Hi

My dad died this year leaving my mum with various pensions which left her financially secure (although not rich!).

He had some pension funds which have paid out their value as lump sums as he died before he retired.

He had another scheme through his work that he didn't even know about. This scheme pays my mum 3/8 of his final salary for the rest of her life and is index linked up to 5% per year. This is the one we are querying. The value of this policy is quite substantial, but the annual amount is only a small percentage. There is a high possiblity that the value would not be used up in her lifetime so we wondered if she could ask for the value to be given in a lump sum or what restrictions there are? Please excuse my complete ignorance in these matters but it seems rather unfair that the insurance company should get to keep most of the value of the fund in the end.

What do we need to check? What are the restricitons on this sort of thing?

Thanks for any help you can give.

jamesd

The pension fund value would need to be something like 20-25 times the annual payment value, so if it's less than that it's reasonable enough. It's hard to say anything about what is reasonable without knowing what type of pension it is (final salary?), the pension and fund values and her age.

MarkyMarkD

I don't believe that survivors' pensions can be commuted into a lump sum.

The conversion factors will be set by the scheme in what is meant to be a fair way. Unless your mother's health is adverse, it should be unlikely that it's better value to have the lump sum rather than the pension and vice versa, in fact.

The insurance company (or the pension scheme, depending on the circumstances) don't "keep the surplus", they use it to give pensions to other people. As I said above, the rate of pension pay-out is set to be fair to everyone.

kelloggs36

Thanks - as we know absolutely nothing about how these things work it was worth asking.