Advice for Pension Options.

dbz5as

Hello all,

I have 4 options for pensions provided by BT. I am having trouble understanding them, especially the maths behind non increasing pensions. Here are my options:

1.
Annual increasing pension: £5156.58
Annual non increasing pension: -
Initial Pension: £5156.58
Lump Sum: £15469.74

2.
Annual increasing pension: £4318.73
Annual non increasing pension: -
Initial Pension: £4318.73
Lump Sum: £28791.54

3.
Annual increasing pension: £2078.83
Annual non increasing pension: £3877.97
Initial Pension: £5956.80
Lump Sum: £15469.74

4.
Annual increasing pension: £2079.38
Annual non increasing pension: £2650.88
Initial Pension: £4730.26
Lump Sum: £31535.86

xylophone

http://www.btpensions.net/128/201/pension-options-more-details

http://www.btpensionersreconnect.co.uk/Pensions%20Increase%20and%20GMP%20Effect.pdf

Does the above help?

http://www.barnett-waddingham.co.uk/comment-
insight/blog/2014/08/18/what-is-a-gmp/

jamesd

Those four choices are in decreasing health order. The worse your life expectancy is, the further down the list you should go. A person in normal good health at say 60 or 65 should choose the first option.

The non-increasing pension choices provide more income up front for those who have medical conditions that reduce life expectancy, at the cost of less after inflation later if they don't die relatively quickly. The lump sum increasing options do even more of a shift towards getting the money early.

Option 2 is for a person who has normal or somewhat reduced life expectancy but some need for a lump sum initially. It's not a good deal with a commutation rate of 15.9:1 but it's not as horrible as some.

A person who is at or above state pension age before the flat rate comes in might usefully consider using the lump sum to fund deferring the state pension while the increase in that is 10.4% a year.

dbz5as

Thank you for the information,

The only question that I have left is when does each option becomes better than the other. For example, how much time is 4 better than 3? How much time is 3 better than 2? and so on. I would really appreciate it if someone could explain how to figure this out.