Lump sum or full pension?

mumsiedebs

What should I consider before making a decision?
A simple calculation of the different amounts leads me to think that it would take me 15 years too "earn" the lump sum. I understand the lump sum would be tax free so would this actually take me longer to "earn" and therefore better to take now?
As pensions generally seem so complicated this seems a very simple and logical approach so am I getting it wrong or not considering all aspects?
Thanks

MallyGirl

not enough info - is this a DB pension?

Dox

If you do take tax free cash, what will you do with it? Will you be able to invest/manage it so that it gets a better return than the pension you've given up in exchange for the tax free cash? Do you have debts to pay off?

dunstonh

A simple calculation of the different amounts leads me to think that it would take me 15 years too "earn" the lump sum.

Does that take into account indexation on the income or level basis?
Is that net or gross of tax?
What is your health like?
What is your tax position?
Do you have financial dependents?
there are few questions to get you going (in addition to the ones already asked). May lead to more depending on answers.

xylophone

This is your SHPS DB pension?

What options have been offered?

mumsiedebs

Mortgage paid off and no debts as this has been a priority for last few years.
I've not found any investments to increase interest over the basic bank account. recently put my savings into Premium Bond's.
My shps is DB and the recent one(since 2003) is LGPS.
My calculation was simply the difference between the full and reduced pension and then this amount used to calculate the number of years it would take to =the lump sum.( I
said it was simple calculation)
No tax implications built into this calculation.
Health is okay but family health is not.
basic rate tax payer.
Partner his his own pensions to consider -but even smaller than mine.

xylophone

What is the full pension on offer?

What is the maximum lump sum on offer?

What would the reduced pension be if you took the maximum lump sum?

mumsiedebs

To take it now:-
For the DB one its £11,389 full pension no lump sum.
£53k lump sum maximum
and reduced pension is £7,985.

swindiff

How old are you now? Will this be your only income until you get state pension, if so maybe no tax to pay initially? Do you actually need the lump some for anything in particular?

mumsiedebs

62 now. i'm still working but would love to retire early. If i didnt take the lump sums but did take the full pensions from both I would still be getting a lot less than my salary(even after tax ) and have limited savings for any capital needs or wants. We like nice holidays! We have our own house so any repairs etc would be a challenge without a lump sum.
I was thinking of using the lump sum to increase my pension until SPA.
If i remain at work for another year then the DB lump sum could potentially be used towards an interest only mortgage for a property to rent out to bring in extra income.
playing with ideas as the lottery isnt coming my way.

xylophone

To take it now:-
For the DB one its £11,389 full pension no lump sum.
£53k lump sum maximum
and reduced pension is £7,985.

£1 of pension buys around £15.60 of tax free lump sum.

The commutation factor is not dire but it is not generous either.

https://forums.moneysavingexpert.com/discussion/5481745/commutation-factor

Remember that at 62 you might expect to live into your mid eighties.

Also consider the index linking on your pension.

https://www.tpt.org.uk/docs/default-source/schemes/shps/scheme-info-for-employers-and-members-db/shps-db-guide-for-members-employee-document.pdf?sfvrsn=32

If you take the full pension while continuing to work however, it is likely to mean that all but around £1000 of your employment income will be taxed (you indicate at 20%).

However, you might choose to regard your pension income as a substitute for part of your salary, perhaps enabling you to consider increasing your pension contributions before you retire. LGPS has various options?