'Old style' Civil Service Pension - Lump Sum?

Hummel

So I'm posting on behalf of my Dad who retired early 10 years ago due to having a stroke while working for the DWP.

He worked there for 30~ years and has a pension which guarantees him income every year. I think it is currently about £26k and goes up every year with inflation. He is 61 currently.

He has savings maybe in the region of £100k+. I'm not exactly sure but it should be more than this.

He is hoping to buy a flat in a nice retirement area which has good wheelchair access and facilities able to cater to him.

Such a place would cost about £250k.

Does anyone who gets a civil service pension, or knows about them, know if he is able to withdraw a lump sum from his pension and then receive less per year? In that way he could hopefully buy it as a second home without taking out a mortgage.

Sorry for teh long post. I'm not sure exactly which pension he is on, just that he worked for the DWP for a very long time, and is guaranteed this £ income per year + inflation. Sorry it is probably not as much info as could be useful.

I will contact his pension provider but it is difficult to do things as I am not him. I have to go through the process of sending forms as his power of attorney and information from his pension adminstrator can be like drawing blood from a stone.

Thank you so much for ANY help It means a lot to my poor Dad.

Andy_L

As he is already in receipt of the pension then he cannot now trade income for lump sum. That can only be done at the time of starting the pension.

greenglide

In that way he could hopefully buy it as a second home without taking out a mortgage.

Why does he want to buy this as a "second home"? That makes it expensive.

Hummel

greenglide wrote: »

Why does he want to buy this as a "second home"? That makes it expensive.

We live in an area where house prices are rising extremely fast, plus he has lived in the same place for a very long time and finds it hard to let go of it. He was hoping renting out the place he has now for about £1500pm would cover a lot of the costs of buying the new place.

Andy_L wrote: »

As he is already in receipt of the pension then he cannot now trade income for lump sum. That can only be done at the time of starting the pension.

Ah that is a shame. So his option is either to buy it outright (if he has enough, probably with some financial assistance from me) or to get a mortgage (assuming he can).

Kynthia

Do you think he's a member of the Classic scheme in the civil service pension scheme? It should be on his paperwork.

If he's in receipt of his pension then the time has passed to get a higher lump sum in exchange for a lower annual amount. However it often isn't good value to do this if you expect to claim your pension for many years. A mortgage might be much better value, and as he has guaranteed income with his pension then he should be able to get a mortgage from some lenders. He should look for a good independent broker to chat through what he can borrow and how much the repayments are.

xylophone

If Dad had intended to rent out his existing home then he would have been "letting go of it"?

If what he needs is a home adapted to his long term needs, then selling his home and buying a really attractive flat would be a far better idea?

And he would not then be wasting money on the higher stamp duty for a second property?

Hummel

Kynthia wrote: »

Do you think he's a member of the Classic scheme in the civil service pension scheme? It should be on his paperwork.

If he's in receipt of his pension then the time has passed to get a higher lump sum in exchange for a lower annual amount. However it often isn't good value to do this if you expect to claim your pension for many years. A mortgage might be much better value, and as he has guaranteed income with his pension then he should be able to get a mortgage from some lenders. He should look for a good independent broker to chat through what he can borrow and how much the repayments are.

I asked him and he says he believes it is on the classic scheme. Thanks a lot for your reply We will look into the mortgage.

xylophone wrote: »

If Dad had intended to rent out his existing home then he would have been "letting go of it"?

If what he needs is a home adapted to his long term needs, then selling his home and buying a really attractive flat would be a far better idea?

And he would not then be wasting money on the higher stamp duty for a second property?

I'm afraid his opinion differs to yours His expectation - rightly or wrongly - is that the value of his house will continue to grow rapidly for sometime. He does not want to sell yet but because of his personal circumstances he needs to live somewhere more suitable. He hopes to use the rental income to either replace lost income from his pension, or to cover the cost of a mortgage as much as possible.

Thanks for your reply

GunJack

I don't want to sound harsh, but it sounds like your dad wants his cake and eat it...the simple solution would be sell current house and buy flat (I'm assuming no mortgage currently) and pocket the difference to add to the already-substantial savings...if he NEEDS assisted living now, it's unlikely he will be able to do without in the future...
no offence, but it sounds like he needs a reality check...

sheramber

Remember he will be due to pay ax on his rental profit.

GunJack

...and Capital Gains Tax when he finally does sell old house if he's living in new flat...

sleepless_saver

Straying from the original question (sorry) but carrying on the reality check theme, you have PoA and are sorting out his pension which suggests he is not able to do it himself. Does that mean that you will be the one acting as landlord for the property for the foreseeable future - that is potentially a lot of ongoing work and responsibility. In any case if neither of you have done it before you might want to have a look at the Residential Landlords Association site to see what's involved.