Higher Pension vs Higher Lump Sum

mrcol1000

I am only 30 but due to ill health have been retired on a local government pension.
So now I have an option. Take a low lump sum of a few hundred pounds and take my full pension. Or take a lump sum of around £6k and take a pension 40% lower. There is also an option of anywhere in between.
I am only 30 and although my health will slowly decline as the years go on I should live at least 20 more years. I have worked out that after 14 years I will receive more money if I take the full pension than taking the lump sum now. I also think it will be better to have a constant higher income as I will never be able to work again and my wife can only work part-time in order to care for me.
My wife however thinks we should take the lump sum and I should enjoy the money while I am still healthy enough to rather than having money when I can't.
The pension goes to my wife when I die but she will receive the full pension regardless of what happens now.

I just wondered if anyone had any views on this? I am sure it comes up a lot. Thanks for anyone's response.

rochja

I am very sorry to hear of your situation. The best advice I can give in these circumstances is to look at any choice you make as the right one so don't make any decision that could sew seeds of discord with your wife or potentially leave her with a headful of 'if only' later on. Seek her opinion and give it more weight than you ordinarily would [interpretation give her free choice without giving her responsibility for the decision]

xylophone

If you took the full lump sum, what would you do with it?

quotememiserable

I normally advise taking the max pension because it normally comes out to be more money, plus it provides certainty of income. Remember its index linked too. I think you'll find its only 50% transferrable to your wife, but if you cash that up to the likely end of her life and its massively more than the cash.

mania112

mrcol1000 wrote: »

The pension goes to my wife when I die but she will receive the full pension regardless of what happens now.

If you mean that regardless of tax free cash, your wife will still receive the same amount - take the cash.

Have a holiday.

mrcol1000

rochja wrote: »

I am very sorry to hear of your situation. The best advice I can give in these circumstances is to look at any choice you make as the right one so don't make any decision that could sew seeds of discord with your wife or potentially leave her with a headful of 'if only' later on. Seek her opinion and give it more weight than you ordinarily would [interpretation give her free choice without giving her responsibility for the decision]

Thanks for your help. My wife is happy with whatever I decide. But yeah its a tough one and we are making the decision together.

mrcol1000

xylophone wrote: »

If you took the full lump sum, what would you do with it?

Probably get our double glazing that is nearly as old as me replaced and stick the rest in the bank as just in case. If I was much older and had paid the mortgage off I would take the lump sum without thinking about it and have the best holiday ever. But with a 3 year old mortgage and another 20 years of it to pay that is a no no

kidmugsy

Interest rates are low. Suppose you took the larger pension and smaller lump sum, and then borrowed if you wanted an expensive holiday. Would the extra pension clear the loan easily? Especially if the loan were, say, an increase in your mortgage loan?

In other words, low interest rates might make it possible for you to have your cake and eat it.

xylophone

In your situation I think I would incline to taking the lump sum so as to make the home as comfortable and energy efficient as possible, to fulfil a mini-dream if I had one, and to set aside a sum for contingencies.

mark55man

I agree with xylophone - akin to aging - you may have more money later, but would you be able to do anything with it if your health had further deterioted.

I know you are worried about your OH and want to give her the most, but I think spending now to make any needed changes to your house, and maybe a little splurge, and certainly a nest egg (if you don't already) to give you peace of mind

but as others have said whatever decision you make don't agonise over it - if it was a "make the most money" type decision it would be easy

atush

Also, if you OH is 30 too, they will have 30-40 years plus to work and save for their retirement so i might be inclined to base your decision on what is best for you.