Civil Service Classic Pension

cobax

I will be taking my deferred Classic Pension next month when I turn 58. Main reason is to supplement my income as currently work part time. Friends who have previously taken their pension always seemed to be advised to take the larger lump sum offer and the smaller monthly pension.

My plan is to put the lump sum into a savings bond for 2 years as don't want to tie it up for too long until we see how Brexit pans out then just keep investing it until I retire and then start to use the capital. The best interest I can get at the moment would be 2.32%.

If I took either the larger monthly pension or the smaller, combined with my wage I would still be under the tax threshold.

Just wondered what peoples thoughts are on whether the advice of taking the larger lump sum would still be the way to go.

Andy_L

Classic already has a 3x lump sum by default.

IIRC there is a little bit of scope to increase that (but not by much)to the however at a rate of 1:12 (ie £1 of pension gives you £12 lump sum) it is an appalling deal - a fair rate would be in the region of 1:20.

Your friends who were advised that were either in a defined contribution scheme or a different defined benefit scheme with a better exchange rate (or had some niche circumstances)

cobax

Yes rate is 12:1. Some took their pension as part of redundancy package and others were pre 2016 if that makes a difference.

My gut feeling is to take the maximum monthly pension but the more I look into it I get more confused

GunJack

I personally would take the pension as-is, i.e. do not reduce the pension for a higher lump sum. That's what I'll be doing with my deferred Classic when the time comes..you can't beat guaranteed income

GunJack

P.s. just remember, if you're taking it early at 58, it's already going to be actuarliy reduced by around 10%-ish just for taking it early....

Andy_L

GunJack wrote: »

P.s. just remember, if you're taking it early at 58, it's already going to be actuarliy reduced by around 10%-ish just for taking it early....

just to add to your range of confusing option I vaguely recall the option to give up (some of) the lump sum to buy off that reduction

cobax

Thanks Gunjack, know it will be reduced by 10% for taking it early and fine with that. Think like you I'll take the 'as is' and not reduce it any further.