What to do with lump sum?

Aegis

Linton wrote: »

What about state pension? That will fix most of the gap when you get to 65.

Definitely something to add in. My spreadsheet worked on the assumption that the state pension would basically be used entirely for luxuries and didn't form part of the necessary income, but a more in depth cashflow model would take account of what was to be done with that.

Fabius

Aegis wrote: »

Definitely something to add in. My spreadsheet worked on the assumption that the state pension would basically be used entirely for luxuries and didn't form part of the necessary income

Thanks for making my point. Bigfreddiel take note.

You have a good amount of capital and a full review with an IFA (an at retirement specialist, look for someone who charges fees and offers cash flow modelling as Aegis has eluded to) will ensure that all of your circumstances are taken into account, especially your requirement and willingness to take risk.

Get a BR19 form completed now too so you know what you'll receive from the state at SPA (assuming your wife has already started to get hers but if not then she can do one to).

Bigmoney2

How much pension would you receive if you don't take a lump sum ( or not the maximum 25%).
Also remember to work out your pension income after tax, as you will not pay NI or pension contributions, so 11K of pension will give you more than 11k of salary per month. The personal allowance also increases at age 65, so again your net income will increase (assuming this hasn't been erroded away by then). With 300k in savings and investments, do you really need more 'cash', even if its generating income at some point you may want to start spending it, unles your planning to leave it to children. Also need to consider the inheritance tax implications of large amount of capital.

atush

I agree that a lump sum is not needed in this case, as they seem to have access to quite a bit of capital. But if the pension lump sum is from a DB scheme, it may be be able to be added back into the pot for additional pension.

bigfreddiel

Thanks for all those replies and I had taken into account not paying NI and pension,I also accounted for my SP and have a forecast - should be anoher £6k approx in 2016.

The lump sum - reverse commutation into pension is such a bad rate it would only buy me £1k additional pension (Classic scheme) so altho' tempting I probably won't do it.

kidmugsy

bigfreddiel wrote: »

What should I do with my lump sum - approx £25k?

Basically I'm looking for income.

S&I: £300k approx - average 4-6% tax free
ILSC, S&S & Cash ISAs, PBs, Savings acct

fj

Pity you're looking for income - not a good time to do it. Perhaps wait for next tax year in hopes of buying more ILSCs and ISAs? To start with, though, you could generate pseudo-income by spending capital that is tax-exposed, or ill-invested (PBs?). That could see you through until your state pension starts.

bigfreddiel

Well thanks evreryone for your answers - all sound advice.

What I want is income from my lump sum - not much hopeof that in the next few years

So what I'm considering is going for inverse commutation of my lump sum

The rate is 4.65% which would add £1190 to my pension

Then of course that will increase by CPI each year.

Other than equities which I'm also invested in I think this is not too bad a deal.

Another option is to go down the purchased life annuity scheme - enhanced as I have a few qualifying illnesses - which I need to look into to see if it beats 4.65%

fj

Fabius

That is a great rate for someone of your age for a CPI linked annuity, 'Classic' suggests public sector so government underwritten.

You have capital already so securing income like this is a tough option to beat.

Enjoy your retirement!