1995 NHS pension-big or small lump sum

younghousebuyer

I am in the 1995 section of NHS pension, i intend to retire in 18 months aged 60. I have to decide wether to go for bigger lump sum/smaller pension, or smaller lump sum/bigger pension.
I have tried to do the sums and consider length of life factors, but any thoughts/advice
Thank you

redwolf

Its a similar issue for me too and there are no real answers
Some people have took the max lump sum some take max pension its an individual choice based on circumstances
My feeling is it depends if you have debts to pay off ie mortgage etc also
the annual increase compounded on pension might be a lot more than interest in the bank on a lump sum

If i can escape i am taking max pension I think !
The closer you are to state pension age is also a factor also if you are retiring with big claw back or being maid redundant ie bigger pension

Brilley

..for us it was smallest lump sum all the way. Preferred to have the "higher" guaranteed pension with index linking. But I suppose it does depend on what other pensions (and debts) you have, and whether you need the extra lump sum for something specific?.

AnotherJoe

Well I'm also struggling to do the sums based on the info you've given.

younghousebuyer

rough figures of options
90 k lump sum and 13k pension
51k lump sum and 17k pension
mortgage paid off, no debt, savings of around 100k
I will get reduced state pension due to contracted being out
spouse pension less than this but reasonable

highet

lots of factors to consider - will you be a higher rate taxpayer in retirement, are you over the LTA, what are life expectencies in your family like, what other pensions/savings etc do you have, do you need the additional lump sum to pay off debts? would you feel confident at being able to invest the extra money profitably, how much money do you hope to leave to your dependents? and do you trust future governments to continue to pay you agreed index linked pension (cf Greece - financial crash - public service pensions slashed)

AnotherJoe

younghousebuyer wrote: »

rough figures of options
90 k lump sum and 13k pension
So that gives you £90k plus £13k a year for 7 years plus maybe £18k a year after age 67 adding in SP and allowing for £1k of tax. Total age 87 £483k (age 87 = live 20 years after getting SP).

51k lump sum and 17k pension
So that gives you £51k plus £16k a year for 7 years plus maybe £21k a year after age 67 adding in SP and allowing for £2k of tax. Total age 87 £441k.
mortgage paid off, no debt, savings of around 100k
I will get reduced state pension due to contracted being out
spouse pension less than this but reasonable

So on the face of it lower lump sum is better if you live to age 87 or a bit lower, however will you need the extra money when in your 80's? Anything you want to spend the bigger lump sum on? A few great holidays whilst in good health?A new car? House improvements? If so take the bigger lump sum, if not take the lower lump sum.

Amateurretiree

I was in almost the exact same position two and a half years ago at age 55. I ended up taking the maximum lump sum, paid the mortgage off, gave son money for a house deposit, went to New York twice as well as our annual Florida holiday. Our monthly outgoings are exactly half of my NHS pension, DH has a substantial SIPP, I get SP in 9 years DH in 4 .
We have 5 years of cash in the bank in case the market crashes, this is a great comfort to me.

So I think what I’m saying is, we didn’t need the guaranteed larger pension later on and we want to make the most of the next few years while we are hopefully fit enough to.

We have been careful with money all of our lives, and still are, but our thoughts are nobody knows how long they have, we feel we have enough for both of us to be taken care of if something happens to the other or not, so I do not regret my decision to take the bigger lump sum.
Of course that’s just our view, others may disagree.

redwolf

i would say if you have 100k savings you dont need the bigger lump sum
also if you die your spouse gets 1/2 pension
worth a thought too

Andy_L

The ratio of £1 pension for £12 lump sum is an appalling deal. If you were to try going in the opposite direction it would cost you >£20 for £1 of pension

redwolf

sacrifice 100 pension for 12k lump but the 100 is taxable usually
so its only 80 quid for life
still a hard decision