Larger pension or lump sum/smaller pension

SonOf

Just a reminder to those posting that the OP said he intended to draw the PPP in lump sums. Something that would not be needed if the higher income is taken. The PPP is outside of the estate too. Whereas the PCLS would be inside of the estate. That may or may not be an issue but we don't have the details to be sure.

So, effectively we have the position where we are comparing taking a higher income but using the £100k PPP for lump sums vs taking the lower income with higher PCLS and not using the £100k PPP.

TheRealBigEasy

The actual wording is
'Maximum tax free cash sum £110,000'
So I guess it is.

robin61

crv1963 wrote: »

There is also life expectancy to consider. Well at least for me it is a consideration, if I take a larger lump sum/ reduced pension then kick the bucket Mrs CRV has a larger cash sum to inherit and the same survivors pension as she would have had anyway.

Or I could gamble that I will live 30+ years in retirement and the larger pension would benefit us both. Luckily I don't need to decide for a little longer.

Are you sure she gets the same spouse pension ? I know with mine my wife gets 50%. So if I'd have taken a reduced pension it would've been 50% of the lower pension. Maybe yours is different but that seems remarkably generous ?

AlanP_2

robin61 wrote: »

Are you sure she gets the same spouse pension ? I know with mine my wife gets 50%. So if I'd have taken a reduced pension it would've been 50% of the lower pension. Maybe yours is different but that seems remarkably generous ?

Most DB schemes, as far as I am aware, base the spouse's pension on the unreduced pension payable and it is not affected by the lump sum commutation.

The spouse's pension at 50% is fairly typical but based on original pension not the reduced pension.

TheRealBigEasy

Thanks for all the comments.
I was leaning towards the higher pension and your comments have cemented my thinking.

Best regards
Jon L

crv1963

robin61 wrote: »

Are you sure she gets the same spouse pension ? I know with mine my wife gets 50%. So if I'd have taken a reduced pension it would've been 50% of the lower pension. Maybe yours is different but that seems remarkably generous ?

Yes, her survivors pension is based on the figure for smallest lump sum and largest pension.

Silvertabby

AlanP wrote: »

Most DB schemes, as far as I am aware, base the spouse's pension on the unreduced pension payable and it is not affected by the lump sum commutation.

The spouse's pension at 50% is fairly typical but based on original pension not the reduced pension.

That's certainly the case for the LGPS - any reductions in respect of early retirement and/or commutation are ignored in the calculation of a survivor's pension.

Alan - contrary to popular belief, the LGPS widow's/survivor's pension is not, nor has it ever been, a bog standard 50%.

The closest it came to that was in respect of pre 2008 service, when the member accrual rate was 1/80th and the widow's rate was 1/160th. Then came any adjustments for GMP revaluation, any pre 1972/1978/1988 service, post retirement marriage, commutation, early retirement, etc.

2008 to 2014:
Member accrual rate changed to 1/60th, but widow's/partner's pension remained 1/160th.

Again subject to above adjustments.

2014 onwards:
Member accrual rate changed to 1/49th, but widow's etc rate still 1/160th.

Bottom line is this is now more like 33% instead of 50% - but as most pensions have been reduced by early retirement or commutation most widow's pensions do come out as more like 50%.

Going forward, with mostly post 2014 accrual, someone who retires at 55 and commutes will have the double whammy of more than 50% early reduction plus the commutation reduction. In these cases, the widow's pension will be more like 80% of the member's actual (reduced) pension.