Civil Service Pension - leaving early

jamesperrett

For most people it is better to take the default lump sum as the rates for either decreasing the lump sum and increasing your pension or vice versa aren't that great. The actuarial reduction on the lump sum is less than the reduction on the pension.

tgon

jamesperrett wrote: »

The actuarial reduction on the lump sum is less than the reduction on the pension.

So, if affordable and the decision to take an early DB pension is made, it may be better to take a larger lump sum and a reduced pension amount? (I guess a larger lump sum can go on and earn interest or dividend.) Ive probably misunderstood this.

kidmugsy

Jennie5 wrote: »

Not taking my pension until I’m 60 sounds sensible if you can afford it, but I would then have to live off my redundancy money for 10 mths and have estimated it would take me approx 10 yrs to recoup what I have spent in 10 mths!

The other way to look at that is that you'd break even in only ten years and thereafter it's pure profit. You won't find a commercial annuity on sale that gives such a splendid return.

On the other hand if it were to be your sole emergency cash it might be too risky to spend a lot of it so soon.

Another view is that later in retirement you'll be better off in terms of income, with your State Retirement Pension adding to your DB pension. Therefore spending some capital across the years until the SRP begins might be pretty reasonable. Therefore start your DB pension on retirement in May 2019 and supplement it with capital as you find desirable.

In truth you are probably spoiled for good choices.

jamesperrett

tgon wrote: »

So, if affordable and the decision to take an early DB pension is made, it may be better to take a larger lump sum and a reduced pension amount?

The problem is that you only get 12 pounds of lump sum for every pound of annual income you give up so you'll need some amazing investment growth if you don't want to end up out of pocket after just over 12 years or so.