Advice on where to put my 25% lump sum

kidmugsy

aphill24 wrote: »

I can't imagine not taking the cash free lump sum, as i would never have the chance to accrue and enjoy the freedom of such a sum of money again. ...

Irrespective of its wisdom I'll assume you mean it.

aphill24 wrote: »

58yrs where there are no penalties:
Option Pension TFL
1 £22,000 Nil
2 £14,500 £96,600
3 £25,500 (£19600) Nil
4 £18,100 (£12,200) £96,600
The figures in 3&4 in brackets are what the annual pension drops to when state pension kicks in. Most workmates go for option 4.

If I wanted the lump sum I might well go for (4). And with the lump sum I would prioritise assiduously building up a personal pension for my wife and one for myself. Even without earnings you can bung in to yours £2880 net per tax year until you are 75. Since you'll be past 55 the money will be available whenever you want it. This is more tax-efficient than an ISA if you live past 75, and potentially much more tax efficient if you die before then.

If your wife's small DB pension doesn't use up all her Personal Allowance against income tax then her personal pension would be very tax efficient indeed: her contribution gets a 25% boost from the taxman when it goes into the pension and then she can manage it so that she pays no tax when the money comes out.

After you have persuaded yourself of the wisdom of this priority I'd think you want a large cash sum, partly to cover for emergencies, partly as part of your asset portfolio to avoid any need to sell shares when the markets are down. £20k in a joint Santander 123 account might suit - the interest rate isn't wonderful but it does pay cash back on your bills.

And you would want S&S ISAs. And who could resist a few £k in gold sovereigns?

aphill24

Thanks for the reply but I have got to say you are completely wrong in what you say about me not having a mortgage at 53 yrs. It's not sad and you hobble yourself with a mortgage not without. What do you expect me to do? Remortgage my house to have some money in the bank? I had a 25 yr mortgage at 25 yrs of age and it has now been paid,, not rocket science just happy that we paid it off when our son started Uni so we could then help him in paying for his student digs. Good planning I would say.

aphill24

Sarcastic as well as the previous poster, what is it with people? I have asked for help with getting the most from my lump sum and you are having a dig about my wisdom? Jog on

aphill24

Thanks bostonerimus. I will be looking for another job as my DB pension is not enough for me to live on at 55 yrs old. If it comes out at £350 I will look for a part time job that would boost my weekly wage to around £550/600. If this takes me to 58 I can fully retire then and enjoy what comes with not working shifts or getting up at 5am.
I dont have much in the way of savings just an emergency fund but I outgoings are low so I aim to put money away for the next few years. Two teenage children eats into a lot of spare cash but I enjoy giving them help as they are both good honest hard working kids.
I enjoy our holidays together as a family which doesn't come cheap and if that means I can't save more then I'm happy to be relatively cash poor with very little debt

enthusiasticsaver

My husband invested 75% of his lump sum in stocks and shares isas and kept 25% to supplement his pension until SPA. I get money from sale of a property in a few weeks time and my pension lump sum in January and plan to do the same. If it exceeds the ISA allowance (£20k per person so £40k per annum for a married couple) then we invested unwrapped and Bed and ISA'd it each April.

You could also do a number of fixed term bonds with one maturing each year say for the next five years.

aphill24

Thanks James, With a pot of 500k I wouldn't like to take a gamble on the stock market when I can have a guaranteed income that is indexed linked. Yes it could make lots more money but it could also drop in value very quickly if we have another black monday.
As I work in a plant with 2k workers you get to hear loads of stories and I know 3 people personally who have died within 12 months of taking their DB pension. These instances the widow gets half of the pension with nothing going to the children when she falls off the perch. This is a very good point of doing a CETV and transferring out so I can see the benefits in these cases but who knows whats around the corner? the kids will have our house when we go so to risk the pension is just not something I want to do.
Has anyone done it and what has happened to the pot since?

redpete

You're basing your numbers on what fellow workers have got in similar circumstances. Can you not get exact numbers for your circumstances from your pension scheme details?

POPPYOSCAR

aphill24 wrote: »

Thanks for the reply but I have got to say you are completely wrong in what you say about me not having a mortgage at 53 yrs. It's not sad and you hobble yourself with a mortgage not without. What do you expect me to do? Remortgage my house to have some money in the bank? I had a 25 yr mortgage at 25 yrs of age and it has now been paid,, not rocket science just happy that we paid it off when our son started Uni so we could then help him in paying for his student digs. Good planning I would say.

I quite agree with you.

It is a wonderful feeling being mortgage free and not owing any money.

Yes you may be able to earn a small amount of interest instead, not worth it IMO.

aphill24

No I cant get my figures yet as I am not 55 but with people of the same length of service they are very similar when compared. Like I said it could be more if they close the plant but we won't know that for definite yet.
I can use the time to explore different ideas of what I need to do and this post has already given me a few.

Thanks

xylophone

Have you and your wife obtained new state pension statements?