Final Salary Pension Scheme - Options

jerrysimon

I am very fortunate to have nearly 40 years in a public sector scheme.

I am looking at taking it early (reduced of course) and have been given the option to increase the lump sum payout but take a smaller yearly pension. The increase would be from around 52K to nearly 100k and would take my pension down to around 13K. The smaller lump sum yeilds a higher pension of 17K.

We still have around 10 years to go to get to state pension age and both my wife and I have contributions that would pay around 6-7K each. Not sure if we get this seperately or a single married pension ?

Anway taking my reduced pension and the state pension equates to around 25K at 66 ish. My wife also has a small school pension at 65.

It appears on paper that taking the larger lump sum and smaller pension will give us more flexibilty finanacially for the next 10 years and of course the 100K is tax free and I will pay less tax on the reduced anual pension. We have cleared the mortgage but have no savings.

I guess what I may be overlooking is whilst the 100K would give us 10K extra tax free (excluding any interest earned) by the time we get to 66, 10K may seem little with inflation. Sticking to the higher yearly pension will of course be indexed linked. I guess the other risk is if the government make more changes to state pension, then we could find ourselves in trouble.

The other bonus is that even if I take the smaller pension my wife would still get over half the larger pension if I was to die early. Part of the reason to leave early is that I do have some medical issues that put me at higher risk than many.

Regards

Jerry

jerrysimon

Just seen this post.

https://forums.moneysavingexpert.com/discussion/5468063

Sorry I guess this must be a common question

Jerry

xylophone

Is there any chance of an immediate unreduced pension on grounds of ill health or that you might be offered redundancy?

[Deleted User]

Sent you a PM.

WR

atush

Generally speaking, unless you will not make old bones you should take the smaller LS and the higher pension.

And if you are still working now, you could whack some cash into a DC pension which would get a boost of TR and you could use that fro one year, so as to take your DB pension next year instead?

kidmugsy

jerrysimon wrote: »

. Part of the reason to leave early is that I do have some medical issues that put me at higher risk than many.

They are offering you £12 of capital for every £1 p.a. of income you forgo. That's a poor rate for someone in good health. But you aren't, so everything turns on your life expectancy. You may learn more from your doctors that you'll learn from us.

jerrysimon

Retirement on medical grounds is an option that I am exploring but if not I have pretty much made a decision to go before the end of the F/Y.

I am a type 1 diabetic with a few minor complications but I guess in many ways I get better health care (checked every 6 months) than most people who dont go near a doctor for years until they get something nasty.

Taking advice from this forum, we took out a SIP for my wife before the beginning of the f/y maxing out a small 8K salary and will fill that up to the max out her earnings this year up to when she leaves in Sep. That will yeild about 11.5 K (input plus 20%) which I guess we could try and live on for a year as you say to reduce the penalty for taking my DB pension early.

My gut feeling is to go for the higher pension. I have a lot of money in my house which is paid off but have access to those funds for the next 8 years when the mortgage ends (oneaccount) though I dont want to close doors by ending up with having to move before I need to because of drawn down equity.

Jerry

atush

Ask your doctor for a full and frank discussion of your personal LE. With type one D and some complications you could be better off taking the pension differently.


How is the wife's health?

jerrysimon

My wifes health is fine. I am not in danger of dying any time soon but the complications are more to do with some eye problems plus increased stress at work make blood sugar control more problamatic which could effect health in the future.

To sum it up I want to enjoy retirement whilst I am still fit and healthy, can't we assed with work and the new management and I have lost all motivation to do it. I do love the interaction I have with long standing
colleagues and friends. Plus a good friend there has just died at 53 after being diagnosed with a brain tumour and its begun to make me focus on whats important.

I have an appointment with my doctor tomorrow who after treating me for high blood pressure and anxiety recommended that I request that they refer to me to OH and now they want a letter from him backing that up sigh...

The easy option would be just to resign.

Jerry

atush

Dont, try other options first. Use that as a last resort?

jerrysimon

Agreed

I feel much more positive today. I had a usefull meeting with the doctor today and he has given me a stratgey to appoach work HR. He's old school (been a GP for 30 years) and I have to say is excellent and has been very supportive.

Jerry