NHS pension commutation

MrDF

My father is retiring from the NHS. He is a member of the 1995 section and there is an option to commute pension for additional pension commencement lump sum.

The commutation ratio is 12:1, therefore assuming the retained pension is taxed at 20% I expect commutation is only preferable if you expect to live for less than 15 years. Is there anything else to think about?

Linton

What would he use the lump sum for?
Guaranteed inflation matching. There is no other way of achieving this. Your 15 years figure is only valid if the lump sum, if not spent immediately would also increase with inflation.

Brynsam

Commutation is worth considering if he has debts to repay and doing so would save a decent amount of interest. Otherwise as Linton says, what would he use a lump sum for?

MrDF

Thanks - he has no specific need for the money and has no debt. Main point to consider seems to be life expectancy, he is in reasonable health but has a picked up a few health conditions over the last few years.

Thrugelmir

Will your father potentially leave a dependent? 

MrDF

Thrugelmir said:

Will your father potentially leave a dependent? 

Only my mother - the NHS pension pays a survivors pension, but it appears that this is 50% of the original pre-commutation pension regardless of what commutation choice you make. She has limited pension provision of her own (covered in a separate thread).

crv1963

MrDF said:

Thrugelmir said:

Will your father potentially leave a dependent? 

Only my mother - the NHS pension pays a survivors pension, but it appears that this is 50% of the original pre-commutation pension regardless of what commutation choice you make. She has limited pension provision of her own (covered in a separate thread).

You are right- whatever your father decides to do regarding commutation of his pension has no effect on the survivors pension your mother will receive in the event he dies first.