Advice on where to put my 25% lump sum

aphill24

I am on track to receive the full allowance of £159.55 if I contribute NI for another 7 years. I imagine my wife is the same as she has never been out of work.

Alexland

Still worth getting a forecast for your wife incase there are any opt out gremlins in her NI history.

I can see why the tax free lump sum might be attractive but taking no tax free lump sum is most likely to give the best return. Circa 12 year payback is a dream for those of us with DC schemes where we will need to spread our money over 30 years.

How many of those 7 missing NI years do you intend to actually work or do you intend to buy some of them?

aphill24

Thanks Alex I will ask my wife to obtain her ni forecast. I don't plan on working past 60 so I should be okay but if I retire at 58 I will pay the two year lump sum.

The only workmate I know who didn't take the lump sum died unfortunately within a year. His wife would have had half the pension and will probably never regain that sum in a higher monthly pension than she would have had if he had taken the lower pension with the 25% lump sum.
There are loads of examples of colleagues working shifts up to 65 yrs of age and then dying within one or two years and it is for this reason the majority take the lump sum and now lots are looking to get a CETV.

Alexland

I doubt your life expectancy will be decided by if you take the lump sum or not. Unless your pension scheme has hired guns to limit their liabilities? Such a tweak would give a whole new meaning to the pension 'protection' fund.

If you really do have a grim view on your life expectancy and really believe you will die before 12 years (or slightly longer as you could invest the lump sum and get a return) and after considering the amount your partner would recieve then I guess follow the maths.

However - if you did die early would your partner have enough or would the higher pension income (or draw down against the invested Lump sum) be required?

Alex

aphill24

Alexland wrote: »

I doubt your life expectancy will be decided by if you take the lump sum or not. Unless your pension scheme has hired guns to limit their liabilities? Such a tweak would give a whole new meaning to the pension 'protection' fund.

If you really do have a grim view on your life expectancy and really believe you will die before 12 years (or slightly longer as you could invest the lump sum and get a return) and after considering the amount your partner would recieve then I guess follow the maths.

However - if you did die early would your partner have enough or would the higher pension income (or draw down against the invested Lump sum) be required?

Alex

I certainly don't expect to die early I am fit as a fiddle :j
Having always been cautious with money it would be nice to have a substantial lump sum to enjoy which leads back to the title of where to put it to best use. Yes, I agree with the long term view it would be better not take the lump sum initially but I want it to work for me and also buy a new (Used) car & caravan to enjoy without having to get a loan and pay interest.
It will be time to enjoy life after working shifts since 1985 believe me the night shifts are not getting any easier.

bigadaj

aphill24 wrote: »

I certainly don't expect to die early I am fit as a fiddle :j
Having always been cautious with money it would be nice to have a substantial lump sum to enjoy which leads back to the title of where to put it to best use. Yes, I agree with the long term view it would be better not take the lump sum initially but I want it to work for me and also buy a new (Used) car & caravan to enjoy without having to get a loan and pay interest.
It will be time to enjoy life after working shifts since 1985 believe me the night shifts are not getting any easier.

It's just a case of running the numbers, typically using a range of scenarios.

If you have a defined spend that needs to be bridged for a few years then there are options like 0% credit cards or low cost loans that might work, unsecured loans can be had for what, 3% maybe, so if you're effectively giving up pension that woudo be generating 6-8% on that money then you're ahead of the game.

Higher returns from lump sum come with risk, be that stock market, p2p, vct etc or you have to expect extremely low returns in the current environment, no such thing as a free lunch and the current scenario has led to an extreme in risk versus return.