Inherited pension advice

neddis

My father passed away early in June and my mom has just been given an offer on his private pension, either £230 a month or a one off payment of £29k before tax at 20%, my mom will be 80 shortly, basically what should she take into consideration or what would you do?

Many thanks for any thoughts offered.

campbell19925

neddis wrote: »

My father passed away early in June and my mom has just been given an offer on his private pension, either £230 a month or a one off payment of £29k before tax at 20%, my mom will be 80 shortly, basically what should she take into consideration or what would you do?

Many thanks for any thoughts offered.

Consider her life expectancy. Is she likely to like another 10 years to make it "worth it"?

Also consider the death benefits on the proposed annuity of £230 per month? What happens to that money if she dies in a couple years?

Personally I'd take the lump sum, why would I want £230 per month when I'm 90. What the hell am I going to use that on

Dox

Would the lump sum impact on any benefits she is receiving - ditto the monthly payment?

Given your own parlous financial situation, perhaps she should be taking that into account and helping you?

xylophone

What is your mother's state pension situation?

Does she have a pension of her own?

Does she have savings/dividend income?

Will a payment of £29,000 be enough to push her into a higher tax bracket?

nigelbb

Average life expectancy for a female of 80 is another ten years. That would be a total payment of £27600 with more if the pension is index linked.

jamesd

Some considerations:

1. she could seek an "enhanced annuity" quote for 23.2k purchase price, that being 29k after 20% income tax. The income offer from the existing pension won't consider her life expectancy, this will.
2. she could take the lump sum and use only some or even none for buying guaranteed income.
3. Is the 230 a month going to increase with inflation? Any caps on hose increases, like maybe up to 2.5% a year?
4. Her state pension would be increased by 10.4% for each year she defers or she can take the deferred amount as a lump sum. A person who has claimed their state pension can still defer once. This might be useful to cut her income tax bill if any of the 29k would be taxable at 40%: start deferring to reduce taxable income this year then take the lump sum or higher income next tax year.
5. Deferring with 23.2k could "buy" £201.06 a month of income that will increase with CPI. This is probably better than the 230 if that doesn't increase with inflation.
6. She'd normally inherit some of the earnings-related "additional" state pension. Should check this to see what her ongoing state pension will be.

campbell19925

nigelbb wrote: »

Average life expectancy for a female of 80 is another ten years. That would be a total payment of £27600 with more if the pension is index linked.

You are wrong. Average female life expectancy is dependent upon your postcode but nowhere near 90. It ranges from about 80-82.

eastcorkram

Even if you're already 80?

TcpnT

You are wrong. Average female life expectancy is dependent upon your postcode but nowhere near 90. It ranges from about 80-82.

No you are wrong. You have not understood the statistics. I don't know the exact figures but you are quoting average the life expectancy of all females. This is completely different to the life expectancy of a female who has already reached the age of 80.

nigelbb

campbell19925 wrote: »

You are wrong. Average female life expectancy is dependent upon your postcode but nowhere near 90. It ranges from about 80-82.

A female aged 80 years has an average life expectancy of 90 years. The older you are then the higher your life expectancy as the average is dragged down by those who died younger.

The older you get the better are the chances of you getting even older.

MEM62

campbell19925 wrote: »

Why would I want £230 per month when I'm 90. What the hell am I going to use that on

Nappies :rotfl: