Very trivial pension pot

arctictern

My husband, who has not yet retired, has been offered a lump sum of just over £210. The deferred pension is about £9.75 p/a.!

He is currently a higher tax payer but will be a basic rate tax payer after retirement. Assuming he survives the next 3 years, was I correct in telling him to wait?

PensionTech

Do you mean wait until he has left his job and take the lump sum then?

If so, then probably yes, as he'll pay substantially less tax - but the lump sum (before tax) will probably be a bit lower because his remaining life expectancy will be lower. The calculation basis (which depends on several factors) may also have changed in the interim, which adds another element of uncertainty.

xylophone

Pay an equivalent amount into his existing pension now while higher rate tax relief is available then if he takes the cash taxed he hasn't lost?

greenglide

£210 lump sum (can you call that amount a lump sum?) or £9.75 pa?

There can be no concept of losing, nobody will get rich?

jamesd

Deferred always means defined benefit like final salary. Please say if this is not a defined benefit pension because that will change the answers you get.

Some defined benefit pensions have an increase in the amount that will be paid if a person delays taking them until after the nromal retirement age of the scheme. Others do not.

If your husband is in a defined benefit pension that offers no increase for deferring than all he is doing by waiting is throwing away three years of £9.75 a year that he will never get back.

Now way to know whether this is the type that offers no increase or not without asking, unless it's one where someone here already happens to know the answer if it's name is given.

Given the amounts it is also worthwhile to contact the administrators to ask whether they would like to reduce the scheme costs by offering him a lump sum alternative to the whole pension that reflects the savings to the scheme and what he would need to pay to buy the extra income on the open market today.