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Lump sum rumours!
Comments
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greenglide wrote: »
Public sector employees that I work with all seem to be counting the days until they get the lump sum - they are convinced that this is worth more than the pension. Planning to buy a Laborghini? Go figure?
They plan to die soon after retirement?:DFew people are capable of expressing with equanimity opinions which differ from the prejudices of their social environment. Most people are incapable of forming such opinions.0 -
HI, can anyone help. I currently work for the London Ambulance Service and there have been rumours of the good old Government changing the rules next year on lump sums in that they plan to tax quite a large amount of it. I have tried contacting my pensions department but they are not answering the phone.
Does anyone know if this is true ?
Aceshigh:A
There were no proposals to limit the tax free Pension Commencement Lump Sum in the last budget.
A think tank called The Pensions Policy Institute has suggested it is capped at around £35,000 and the IFS has also weighed in and suggested the 25% should be reduced.
However I think it's safe to say George Osborne is not a great believer in taxing new pensioners as it would be near electorial suicide for the Tories.
I don't think you can say the same about Labour or the LibDems.
With this in mind I wrote to George osborne last week and asked him how quickly could a future government or chancellor change the rules on the 25% tax free lump sum. Could it be changed in a matter of hours, days or weeks by an executive order or would it require an act of parliament and so take months giving people a chance to take their pensions early.
When I get a reply I'll copy it here.0 -
chucknorris wrote: »I am in the TPS (Teachers' pension scheme) you would have to hold a gun to my head to get me to take the 25% lump sum, at a conversion rate of 1:12 (£1,000 pension cost per £12,000 of lump sum taken) it is terrible value, it is far better to take the £1,000 as pension income.
What is your conversion rate? Is it compulsory to take the lump sum?
I'm also on TPS and considering taking my pension...
Is it really better to convert some lump sum over to the monthly pension?? I can't decide what to do!
Because LS isn't taxed and can be invested, does that not make it an attractive option compared to the taxed monthly pension?
Any thought would be welcome to help me decide if I need to swap LS for monthly pension (is this called 'commutation??)!
THANK YOU0 -
greenglide wrote: »Planning to buy a Laborghini?
Similar to a Lamborghini but funded by borrowing from future generations?I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
greenglide wrote: »Public sector employees that I work with all seem to be counting the days until they get the lump sum - they are convinced that this is worth more than the pension. Planning to buy a Laborghini? Go figure?
Those who are close enough to retirement to be counting down well be on the older schemes that had a compulsory lump sum - 1/80ths plus a 3x lump sum as opposed to 1/60ths with optional (and appalling) 1:12 commutation0 -
I'm also on TPS and considering taking my pension...
Is it really better to convert some lump sum over to the monthly pension?? I can't decide what to do!
Because LS isn't taxed and can be invested, does that not make it an attractive option compared to the taxed monthly pension?
Any thought would be welcome to help me decide if I need to swap LS for monthly pension (is this called 'commutation??)!
THANK YOU
Swapping pension for lump sum is called commutation
Swapping the lump sum for pension is called inverse commutation
What rate are they offering for inverse commutation?
The pension, compared to investing the lump sum, is inflation linked & guaranteed. The lump sum gives you more flexibility0 -
Those who are close enough to retirement to be counting down well be on the older schemes that had a compulsory lump sum - 1/80ths plus a 3x lump sum as opposed to 1/60ths with optional (and appalling) 1:12 commutation
...when I took my DB pension a few years ago I gave up £6.8k of pension for £132k( ~ 19.3 commutation rate) -worked out then it was worth doing ...but 1:12?:eek:0 -
brewerdave wrote: »...when I took my DB pension a few years ago I gave up £6.8k of pension for £132k( ~ 19.3 commutation rate) -worked out then it was worth doing ...but 1:12?:eek:
That's been the (main) public sector rate for years. I believe there's even one that actually tells members that their factor is rubbish, might be the Miner's IIRC.
A lot of private schemes used to be even worse, 9:1 for males and 9.8:1 for females at 65 wasn't uncommon but most private schemes have long since improved these rates.It only takes one tree to make a thousand matches, it only takes one match to burn a thousand trees. As well, the cars are all passing me, bright lights are flashing me.
Johnny Was. Once.
Why did he think "systolic" ?0 -
I'm also on TPS and considering taking my pension...
Is it really better to convert some lump sum over to the monthly pension?? I can't decide what to do!
Because LS isn't taxed and can be invested, does that not make it an attractive option compared to the taxed monthly pension?
Any thought would be welcome to help me decide if I need to swap LS for monthly pension (is this called 'commutation??)!
THANK YOU
What is the conversion rate on offer? If it is 1:12 and say you took a £24,000 lump sum instead of a £2,000 pension. Where would you invest the £24,000 and what return would you expect?
Not taking the £24k as a lump sum and taking it as pension would give you a return of 8.33%, which is going to be very difficult to better. Of course you have to be content with not being able to access the lump sum, that isn't a problem to me, but it is subjective so you have to decide what is best for you.
EDIT: I am in the revised (newer) TPS where there isn't an automatic lump sum and my conversion rate is 1:12, but I'm not sure about the older scheme.Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop0 -
However I think it's safe to say George Osborne is not a great believer in taxing new pensioners as it would be near electorial suicide for the Tories.
I don't think you can say the same about Labour or the LibDems.
With this in mind I wrote to George osborne last week.......
Where is your evidence to support this random thought?
The changes in the last budget are generally popular and designed to win votes. Whether they are a good idea time will tell. Responsible behaviour will mean the changes are positive, Irresponsible behaviour will mean people use the funds early and so run out of money earlier and rely on benefits. In that sense its a bit of a gamble since nobody knows how it will affect people's behaviour. But if there is too much irresponsible behaviour any Government will have to act and playing with the tax regime is one way of doing this.Few people are capable of expressing with equanimity opinions which differ from the prejudices of their social environment. Most people are incapable of forming such opinions.0
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