NHS Pension

thebullsback

I am now in a position to claim my NHS pension {the 95 Version} my question is as I'm now 60 is it best to take £6696 p.a.+ £2089 Lump sum OR £5381 p.a. +£35874 Lump sum?
My logic says smaller yearly pension and large lump sum but I know you people can often cast a different light on things .

Pension_Geek

Have you got any other pensions? How much tax will you pay in retirement? What would you do with the lump sum? Have you obtained a State pension forecast?

Also, I would assume you have protection from the 2015 CARE scheme but have you?

AnotherJoe

thebullsback wrote: »

I am now in a position to claim my NHS pension {the 95 Version} my question is as I'm now 60 is it best to take £6696 p.a.+ £2089 Lump sum OR £5381 p.a. +£35874 Lump sum?
My logic says smaller yearly pension and large lump sum but I know you people can often cast a different light on things .

Assuming you pay tax on the full pension, then after tax you'd get about £1k a year more from the larger annual pension. But you get about a £34k lump sum with the smaller. So it would take 34 years to break even. Even if you dont pay tax on all of it, you must still be looking at say 25 years.

So unless my maths is off somewhere I'd take the bigger lump sum.

Andy_L

thebullsback wrote: »

I am now in a position to claim my NHS pension {the 95 Version} my question is as I'm now 60 is it best to take £6696 p.a.+ £2089 Lump sum OR £5381 p.a. +£35874 Lump sum?
My logic says smaller yearly pension and large lump sum but I know you people can often cast a different light on things .

Are you sure about that 2nd lump sum number? AFAIK the NHS converts annual pension to lump sum at a 1:12 ratio which would give you a lump sum of £17869 not ~£35k

Flugelhorn

Andy_L wrote: »

Are you sure about that 2nd lump sum number? AFAIK the NHS converts annual pension to lump sum at a 1:12 ratio which would give you a lump sum of £17869 not ~£35k

You are right - it is 12:1, your figures would be correct.

thebullsback

in addition to NHS I have

1-an old FS pension that now would give me £1347 p.a. or I could take £34000 pot.
2-Aviva pension with £30000 in pot
3-Aviva again with £15000 in pot4
4-Bond 32 with the Pru. that will pay £2368 p.a. from age 62



Tax is my concern as my thinking is if it take larger anual pension this income takes me nearer my personal allowance as i assume that if i use drawdown I would qualify for not paying tax on withdrawls until I hit PAL

hugheskevi

I'm now 60 is it best to take £6696 p.a.+ £2089 Lump sum OR £5381 p.a. +£35874 Lump sum?

Shouldn't that be £6,696 + £20,089 lump sum? Then the figures make a lot more sense.

Tax is my concern as my thinking is if it take larger anual pension this income takes me nearer my personal allowance as i assume that if i use drawdown I would qualify for not paying tax on withdrawls until I hit PAL

The old FS pension of £1,347 with a capital value of x25 and being over £30K and so requiring expensive advice to transfer doesn't look attractive to transfer. Add that to the s32 pension of £2,368 and the NHS pension of £6,696 plus State Pension of and you have a total income £16,619 at State Pension age of 66, well above the Personal Allowance of £12,500 (in 2019/20).

With £45,000 of Defined Contribution pension, you should be able to fully use your Personal Allowance every year before State Pension age. You have £33,750 of taxable income from the DC pensions after taking the 25% tax free lump sum. You have NHS pension of at least £5,381 p/a and with the old FS and s32 it all looks like you will have an income of at least the Personal Allowance level each year with drawdown.

Therefore I think you should be taking the best value proposition, and a 12:1 commutation rate at age 60 is terrible value, so the higher pension appears best unless there are particular circumstances that makes the lump sum attractive.

Silvertabby

“ I am now in a position to claim my NHS pension {the 95 Version} my question is as I'm now 60 is it best to take £6696 p.a.+ £2089 Lump sum OR £5381 p.a. +£35874 Lump sum?
My logic says smaller yearly pension and large lump sum but I know you people can often cast a different light on things .
Originally posted by thebullsback

Are you sure about these figures? Using your standard benefits of £6696.00 pension and £2089.00 lump sum, I make your maximum lump sum commutation option £4416.48 annual pension and £29,443.21 lump sum.

thebullsback

I have double checked my figures and its

£6696 p.a. + £20089 Lumpsum

£5381 p.a. + £35874 Lumpsum

Flim

My spouse is at the same point in time and we prefer the option of a higher (index linked) pension (for life) rather than have an increased lump sum. In fact if we had the option for no lump sum and a higher pension we would go for that. I think my calculations worked out that the lump sum was not that good compared to the reduction in an ongoing index linked pension. But I suppose it depends on your life expectancy and other money / debt you have at the point of retiring....

Mr_EDATD

Have you checked your state pension entitlement? How much you get here will determine how much tax you would pay on the difference in annual pension.

That being said even if it is taxed i would probably take the lower lump sum. The annual amount will rise by CPI and provide income for life rather than being hit by inflation risk or a market crash (assuming you save/invest rather than just spend straight away)

If you need a pot of cash above the £20k lump sum from the NHS pension the 1st pension you list in your 2nd post would be better value for money (about twice as good assuming you can withdraw it in a tax efficient way).