Commutation factor

kidmugsy

Worried_of_wakefield wrote: »

looks like the cruise is off the menu!

I don't see why. Take out a loan: we have the lowest interest rates for 4000 years, some say; others say for 5000. Pay it back out of your State Pension when the interest-free period ends on your 0% credit card (which you want to open while you still have a salary).

saver861

Worried_of_wakefield wrote: »

Now this may seem very naive but I'm sure I've read posts where in certain cases the pension provider has offered an 'en-hanced' LS in order to reduce thier future liabilities. Given that I intend to live to at least 112:j ,would making them aware of this new information encourage them to 'up the anti'?

Not sure what your intention is re upping the anti ... as stated, the commutation is pretty dire for a healthy dude in his early 60's.

Even if they did up the ante it would just improve the commutation factor marginally I'm guessing. So it ain't a runner no how for a strapping young lad like yourself!!

kidmugsy wrote: »

Pay it back out of your State Pension when the interest-free period ends on your 0% credit card (which you want to open while you still have a salary).

Ain't no worries about getting 0% when retired either ... now that 0% cards has made a comeback and me being a retired gent, they still falling over backwards to give me (and Mrs S) their 0% cards. Credit limits not quite what they were in the good ole days back in the 90's, but plenty of them dishing out.

zagfles

GunJack wrote: »

Originally Posted by PensionTech
Er. What?

£25.3k - £15.4k = £9.9k

£102.5k / £9.9k = 10.354.

Carp = various species of oily freshwater fish from the family Cyprinidae, a very large group of fish native to Europe and Asia.

Oops!!! glancing at it I thought it was 23.5

ok, I'm a numpty

p.s. that's worse than the CS's 12:1

Actually you weren't far off if you take tax into account! The income will be taxed, the lump sum won't, so the £9.9k income becomes £7.92k net, 102.5/7.92 = 12.94!

Still pretty dire, mind. Though fairly typical.

GunJack

zagfles wrote: »

Actually you weren't far off if you take tax into account! The income will be taxed, the lump sum won't, so the £9.9k income becomes £7.92k net, 102.5/7.92 = 12.94!

Still pretty dire, mind. Though fairly typical.

:rotfl: vindicated!!! :rotfl: cheers zag

ischofie1

PensionTech wrote: »

Agreed, it looks rubbish.

Just a note on this though:



Age is a factor here. Your commutation factor will be lower as you get older. I'd be truly surprised if 26 was the factor at age 65, so it's probably not directly comparable with the OP's situation. It also depends on all sorts of scheme-specific elements - schemes that provide more generous increases in payment will provide higher commutation factors, schemes for more well-paying jobs will tend to assume higher than average life expectancy and therefore higher factors, etc. That said, 26 is better than anything I've seen at pretty much any age or scheme design except a few PPA cases where members could retire before 55. Lucky!

Correct - I was 48 when transferring out.
I appreciate there would be many other factors to consider, hence my situation may not be totally suitable as a "cross ref" for the OP but none the less, a factor of 11 is far too low.


Incidentally - When I transferred out, I did have other work colleagues who transferred who were much older (close to 65) & they also got these high commutation factors.
A work colleague at the time had a brother who was high up in the investment banking world & he gave his opinion on the TV's being offered.
To use his words at the time...All the planets (low gilt yields Etc) are currently aligned in favour of high TV's and it would not be likely that this situation would remain or get better.
This formed part of my decision to take the transfer.


Effectively this high TV may have simply been down to timing & a bit of luck!


Regards.

PensionTech

Ah. You got 26x your pension when transferring to a DC scheme - not commuting for a lump sum. Very different to a commutation factor.

ischofie1

Yes.
Apologies for confusion.

Worried_of_wakefield

Thanks everyone, my worst fears confirmed, however having entered the ' no LS' option into my spreadsheet it appears the benefit cross point of not taking the LS does not kick in until age 80 then climbs in my favour quite dramatically from that point on. ( good for the kids I suppose!) Whilst its my problem and my choice I'm wondering if I could be cutting my nose off to spite my face by not enjoying the treats a LS could provide from age 65-80.

I keep staring at my pension quotation with a dopey look on my face , anyone help with a calulation to allow me to work out various LS / pension scenarios, again my figures are £25.3K full pension or alternatively £15.4K + £102.5K LS.

Seabee42

As you have been shown the commutation rate is dire. Things like tax do matter a lot but an income of 15k is an awful lot less than 25k. So when you talk about enjoying the benefits there is also the benefit of having more money each month.


Sure if you die well before 80 the cash make sense but at 80 having spent the cash maybe you would be living on considerably more.


Anyways its your money your choice.

saver861

Worried_of_wakefield wrote: »

Thanks everyone, my worst fears confirmed, however having entered the ' no LS' option into my spreadsheet it appears the benefit cross point of not taking the LS does not kick in until age 80 then climbs in my favour quite dramatically from that point on.

I'm not sure how you are working that out. From your OP you have your age at 61.5 years. The commutation is around 11 years. That means the breakeven point would be around 72 or so for you.

Don't get where you are getting the breakeven at 80?