Lump sum or no lump sum that is the question?

kidmugsy

dbs wrote: »

... spends quite a lot of time caring for her mum who has dementia. I think she will take the lump sum to enjoy it whilst she has good health.

An entirely reasonable argument: good luck with your decision. I would not, however, leave this point dangling: "When I retire if I die I don't know what pension my wife would get."

andy001

Great discussion
Silvertabby: Is there a break even calculator to decide when to retire and if its cost effective to retire at certain age?
Thanks

Silvertabby

andy001 wrote: »

Great discussion
Silvertabby: Is there a break even calculator to decide when to retire and if its cost effective to retire at certain age?
Thanks

Not that I'm aware of. It depends on the commutation rate of the scheme. If you want to try your own number crunching, have a look at the difference between:

Pension only X number of years you expect/hope to live in retirement = £

Lump sum X 1 plus reduced pension X number of years you expect/hope to live in retirement = £

Rule of thumb for the LGPS (1:12 commutation rate) is 12 or 14 years, depending on tax status in retirement (lump sum is tax free, annual pension is taxable income). You may also wish to factor in the future cost of living increases that would have been paid with the higher pension....

HTH

swindiff

dbs wrote: »

Current railway pension payable at 60 yrs old £7,000 a year with 40k lump sum but is under review again not enough in the pot and I am not age protected so they could increase the age to 65 with a 50% reduction at 60 if I am unlucky.

If changes are brought in this would only affect future contribution. Existing contributions are protected by law. So the actuarial reduction would only affect the portion of your pension that you contributed to after the changes to the scheme were made.

andy001

Silvertabby wrote: »

Not that I'm aware of. It depends on the commutation rate of the scheme. If you want to try your own number crunching, have a look at the difference between:

Pension only X number of years you expect/hope to live in retirement = £

Lump sum X 1 plus reduced pension X number of years you expect/hope to live in retirement = £

Rule of thumb for the LGPS (1:12 commutation rate) is 12 or 14 years, depending on tax status in retirement (lump sum is tax free, annual pension is taxable income). You may also wish to factor in the future cost of living increases that would have been paid with the higher pension....

HTH

Thank you!
So generally speaking for these schemes including NHS pension- it would make sense to retire at 55yrs if one can afford to than retiring at SPA (67yrs)? (May get extra 12yrs by retiring early)

Silvertabby

andy001 wrote: »

Thank you!
So generally speaking for these schemes including NHS pension- it would make sense to retire at 55yrs if one can afford to than retiring at SPA (67yrs)? (May get extra 12yrs by retiring early)

It depends on how much your pension would be reduced for taking it early. Assuming the NHS operates in a similar way to the LGPS, the early retirement reduction would be calculated first and then the commutation.

This is the commutation gizmo for the LGPS - but it will work for the NHS and all other pension schemes which use a commutation rate of 1:12

How much lump sum would you like to take?

jamesd

andy001 wrote: »

Is there a break even calculator to decide when to retire and if its cost effective to retire at certain age?

Try cfiresim, discussed with some worked examples at Drawdown: safe withdrawal rates.