Company Pension & TFLS

maximumgardener

straight
choice
1. full £27 k pa index linked etc etc

2. £19 k pa index linked + say £10k per year (tax free) & indexed as well, if you like .
........its your money ex your £127k TFLS

choice 2 would appear to give you a greater nett income if you are disciplined enough to arrange /manage it properly. more efficient with tax etc dependent on SIPP and when you draw State Pension etc

you could start a pension for a spouse or grandchild with the excess income if you have an abundance of income?

maximumgardener

option 1 gives
27000 - 3200 tax = £23800 nett pa

option 2 gives
19000 - 1600 tax =£17400 nett + £10000 tax free element (DD) = £27400 nett pa

(both assume full tax allowance £11000)

mgdavid

maximumgardener wrote: »

option 1 gives
27000 - 3200 tax = £23800 nett pa

option 2 gives
19000 - 1600 tax =£17400 nett + £10000 tax free element (DD) = £27400 nett pa

(both assume full tax allowance £11000)

Ridiculous; how long does Option 2 last? 12 years? and then what?
So at 68 the OP takes a drop in income even with SP, and simply prays that inflation stays below the capped pension increases?
The thought of being poor from 70 doesn't appeal to me at all. Now if you'd calculated using the rule-of-thumb of 4% safe withdrawal level from the SIPP you might seem more credible.... but then he'd have to manage on c. £23k per annum, not exactly the lap of luxury.

maximumgardener

in all likelihood the 127K (invested) would last 20 years minimum and OP could elect to draw down less if he chose to spin it out further. Its an option.....obviously

maximumgardener

yes..... ...it would certainly help if OP told us the approx value in the separate SIPP fund?

Trumpeter

mgdavid wrote: »

If you're making decisions based on your maths skills then I'm concerned for you; £2400 divided by 52 weeks is £46 (not £12).

Hmmm, not sure how I managed that one. It's not even close enough to blame it on "Fat Finger Syndrome" :embarasse

Looks like what I thought to be a fairly simple question is more complex. Thought there would be some way of preserving the tax free status of the lump sum but that's obviously not the case.

So it comes down to a gamble between what I know now against what might happen in the future.

My background is such that it doesn't matter if I draw down & spend the lot. I'm living in a house that's currently worth about £200K with no mortgage. I've no children or other close family to leave anything to. I do have a wife but if I died before her, she would be entitled to a widow's pension of about £13K, irrespective of whether I took the higher or lower sum. It is fixed by the scheme.

So I only have two concerns about real old age. One is will I live long enough to see it? As I said before, I think I'm in reasonably good health but I've spent nearly 40 years working shifts at the proper sharp end of heavy industry so I can't be sure. A fair percentage of my old colleagues have passed on either while still at work or soon after, Having said that, there are also a lot who are drawing pensions well into their 80s.

The other concern is of course spending up too early & living a long time in relative poverty. Will £19K index linked + whatever the SP is at the time ever be considered as poor? Will I need every penny I can get to pay for care home fees?

Who knows? (rhetorical question BTW:D ) Maybe I'm getting a bit too philosophical here but it's all coming a bit quick. Never really expected to have to think about redundancy & retirement for another few years but hey ho! Big thanks to all who have given their time to help. And I sure I'll have a few more sleepless nights about whether of not I've done the right thing, even after any decision is made. Could turn out that the original idea of keeping a bit & giving a bit up is best, even if it's just because I can't possibly be completely wrong.

Can I??? :rotfl::beer:

mgdavid

Yep, lots to think about; as you rightly point out the big unknown is 'when am I going to die'. And 'will it be quick or will I suffer declining health and need to spend out on care?'
I'm of a similar mindset and might take the 'preserve a bit of income and spend a bit soon' option too.
For the benefit of future readers, do let us know what you decide and how you get on...

maximumgardener

indeed ....lots to think about . Big decision/s.
you have presented your info concisely but there are many wider considerations as you are obviously aware.
not least of those has to be what you (and your wife) want and need for the foreseeable future!
This in terms of the income you believe you need in retirement ?
Get SP forecasts for you and your wife if not done already

+try getting your numbers into "retireasy.co.uk "
useful tool.
your middle ground position(£80k tfls & £22k pension) may well give you the blend you need .
who knows ....only you and your missus can decide.
I'm also thinking 56 is pretty young to fully retire but thats your call. think about part time work
eg 2 or 3 days per week & phase down?

good luck!!

mg

kidmugsy

What are you going to spend the £127k on? An annual three weeks in Tuscany in September: brilliant for food and beauty? A winter sunshine break in Madeira every January: lovely spot? A third holiday: part of May/early June in the West Highlands when it is often sunny and dry? (For heaven's sake don't go in July or August.) Lengthy jaunts in NZ and Australia?

You might want to change your car and spend a bit on the house. You might want to put £6k p.a. to ordinary outgoings, to be replaced by State Retirement Pension in due course. (Have you got your prediction of that, by the way?) Contribute to a personal pension to build up a sum that can be inherited free of IHT?

Unless you know what you plan to do with the lump sum, why would you be keen to sacrifice secure income get your hands on it? Everything turns on purpose.