Final Salary Pension, maximum pension or lump sum

kidmugsy

What's the commutation rate on offer?

RichandJ

kidmugsy wrote: »

What's the commutation rate on offer?

OP said he was in LGPS so probably the usual derisory 12:1.

kidmugsy

RichandJ wrote: »

OP said he was in LGPS so probably the usual derisory 12:1.

It is a truth universally acknowledged that man in good health and without expensive debt in not in want of a lump sum at a commutation rate of 12:1.

Andy_L

kidmugsy wrote: »

It is a truth universally acknowledged that man in good health and without expensive debt in not in want of a lump sum at a commutation rate of 12:1.

very roughly you'd need about £20 lump sum to buy £1 of LPGS-style pension

xylophone

12:1 is far from generous.

However, it really depends on what the OP wants out of life - there are no pockets in shrouds!

RichandJ

xylophone wrote: »

12:1 is far from generous.

However, it really depends on what the OP wants out of life - there are no pockets in shrouds!

True (both bits) & from my experience in day to day admin 90% + take the cash, probably less than 1% query the comm factors.

I think it has a lot to do with people wanting a lump sum now, whether it be to pay off mortgage or enjoy the first few years of retirement. Whether this is the correct long term financial decision for them rarely seems to enter the equation.

I can however see the attraction of "you're a long time dead", "can't take it with you", "might get run over by a bus tomorrow", etc, so do understand why a lot of people take what might be the biggest bit of cash they've ever seen.

Party_Animal

Thanks again for all the help. Yes its 12:1. Are other schemes more generous? Anyway that's what we get. I understand the consensus is for the maximum pension . I'm still not sure. Again, I don't know how many years I've got left. Big decision. Probably one of the biggest.
Thanks again

kidmugsy

The big deal, I suggest, is the inflation protection you get with the pension but not with the lump sum. What does LGPS offer - full CPI protection?

With the lump sum you'd be a mug to buy index-linked gilts currently (rotten yield), new index-linked savings certificates aren't being issued at present, and there don't seem to be any inflation-linked ISAs at the moment either. So the lump sum makes sense only if you mean to spend it, otherwise inflation might eat it away. (That's assuming you'll live a long time - if you don't plan on that, take the lump sum without more ado.) If there's something you really want to spend it on, fair enough. (12:1 is a wonderful rate, but for us taxpayers, not for you retirees.)

Party_Animal

Thanks Kidmugsy. That's made my mind up. Big help.

Party_Animal

Just to cloud the issue. I was reading my statement today as I'm still not 100%. The widow's pension is a fixed amount not a percentage. So the OH would get the same whichever I choose.