Guidance - pension options

ProDave

Linton wrote: »

Wont the pension be subject to annual revaluation which could reduce the payback time significantly?

I picked the higher figure of a fixed, non increasing pension on offer.

MarkB

Option 1 is RPI linked, so assuming living to 90, a 3% annual rise would total 226k, 4% would be 268k and 5% would be 320k.

....so even assuming no return at all on the 275k lump, I'd need to live to 91 at 4% RPI average to hit break even.

xylophone

increases only applied to the pre-88 GMP element

Are you sure of this?

Normally one would expect no increase pre 88 GMP, only up to 3% post 88 GMP, scheme rules on the excess.

AlanP_2

xylophone wrote: »

Are you sure of this?

Normally one would expect no increase pre 88 GMP, only up to 3% post 88 GMP, scheme rules on the excess.

You're correct, I got my pre and post mixed up, thanks for spotting it and correcting me.

If it was pre-88 it would be better for me, so wishful thinking maybe.

caldejud

The thing is if you do go ahead and explore a transfer you will need an IFA and they normally want to do a lifetime cashflow plan to cover your future commitments and finances and you will see on this forum that some IFAs do charge an arm and a leg for this type of advice.

FWIW you may want do do some cash flow planning yourself and we use the Retireeasy lifeplan for our planning as others on here do or you can work through a spreadsheet.

AlanP_2

caldejud wrote: »

The thing is if you do go ahead and explore a transfer you will need an IFA and they normally want to do a lifetime cashflow plan to cover your future commitments and finances and you will see on this forum that some IFAs do[STRIKE] charge an arm and a leg[/STRIKE] charge a fee for this type of advice.

FWIW you may want do do some cash flow planning yourself and we use the Retireeasy lifeplan for our planning as others on here do or you can work through a spreadsheet.

My quote was a lot less than an arm or a leg and to be honest I haven't seen any references on here to it being as bad as that. Whether you think it is worth paying or not is a different question, and not one worth asking really as you have no choice in the matter.

jamesd

At the current 5.8% per year of state pension deferral rate it would take a person starting at £8,000 a year just 9.8 years of deferring costing £78,400 to get CPI linked income of £4,532 a year. While the rate is likely to change that looks like a good long life plan. It's by far the cheapest way to "buy" inflation-linked income.

The income at 60 is just 1.65% of the pot value today if it grows with inflation. At 55 the old fashioned level inflation-adjusted approach would have a safe withdrawal rate above twice that and using Guyton-Klinger rules above three times it, reducing if you happen to be retired during bad investing times.

The IBM pension might be defined benefit and combine with the state pension to produce a very useful base level of income.

If you're comfortable investing and willing to adjust income if necessary then the lump sum looks like a good option.

So far as retiring at 55 goes your job history suggests that you could do that or earlier if sufficiently motivated. The most important factor is the income level you really want, then whether you're willing to invest enough now to achieve it. Saving at least 60% of my income over 12 years got me to the point where I could retire on more than £21k a year plus the state pension later even using old-fashioned drawdown rules.