Where to put my lump sum and use monthly

jimi_man

It depends what age you when you take it. If you're 65 for example then it's an OK rate. If you're 55, then not so much.
Also I couldn't make sense of your figures? '95000 without lump'? Are you saying that the choices are £8k plus a £55k lump is one option? And the other option is £95k lump and (£8k- 1673)?

marmite101

Jimi_man
Sorry,I'm not being clear.
I'm 55, £9500 per annum with no lump sum.
£8000 per annum with £55000 lump sum.
These are my options.

jimi_man

Hi
Ok I understand now. Some things to bear in mind when deciding whether to take it or not. 
Do you have other cash savings, or are you relying on the £55K to be your cash savings and for it to form part of your retirement portfolio? For example if you've got a large cash/savings buffer and this will just add a little bit then it's probably not worth it.
Do you have other immediate needs for the cash - immediate debts/large expenditure required. Personally I wouldn't pay my mortgage off with it since most mortgage interest rates are so low, however others might feel differently and want the freedom.
Health - a healthy 55 year old can expect to live another 30 years, but if you're not then that might be a reason to take it. 
Tax - on its own you wouldn't pay tax on either amount until state pension age, but if you have other income then you would, whereas you wouldn't on the lump sum.
Is the pension index linked and up to what amount, since that would make a difference on the extra pension if you don't commute.
What is the spousal provision? Do they still get 50% (usually) of the full pension?
And the original question you posted, what are you going to do with it? What is your attitude to risk, what do you know about investments? Personally I think it would be silly to take it and put it in the bank earning 0.01% interest, but if you are comfortable with the idea of investing it for growth - for example in an ISA or SIPP, then you might do a bit better than that. If you start off with the thought that left in the pension scheme £55,000 will earn you £1500 + inflation, guaranteed every year until you die, then you can look at the alternatives. 

All these things need to be considered. Just remember that if someone says to you to take the lump sum/not take the lump sum, just on the basis of the figures you supplied, then they can safely be ignored on the basis that they don't know what they are talking about. It's an individual decision that can only made when there is sight on all the factors in play. 

Also, looking at those figures, it seems that £55,000 is about the most you can take without incurring tax - 25%. I presume you can scale it back and take less lump sum? Something to think about. 

xylophone

Around next March, you might consider opening a SIPP with a contribution of £2880, wait for the tax relief to be added which would bring the pot up to £3600, take the PCLS and set to take the balance as monthly income of  £225 a month.
https://forums.moneysavingexpert.com/discussion/5580163/paying-2880-into-pension-when-retired

You could then do the same in following years.
You could hold the lump sum in NS&I Income Bonds. https://www.nsandi.com/income-bonds

wjr4

FYI it is not 25% tax-free cash like defined contribution pensions. It is simply a tax-free lump sum. Do you NEED to take the pension now? I assume the early retirement reduction is quite hefty. 

marmite101

jimi_man
i need advise that i am doing the right thing.
my plan is to live on the £8000 per year divided by 12 months plus use the lump sum divided by 12 years {date when i get state pension} so the 55000 lasts me  until state pension which will then take over as the 55000 would have run out by then.
i will then have enough money per month to live on. i hope this makes sense.

jimi_man

Ah, I see what you're trying to do.
I think the first thing to say is that this is an opinion forum and people don't actually give advice, so no-one can advise you whether you are doing the right thing. Especially in this case, where getting any information out of you is like getting blood out of a stone, (I don't mean that nastily, I understand that people can be reticent to disclose information on the internet, but it has taken two pages to get here. ). So there is a limited set of facts to work from. 
My thoughts are that if you only have the £8K a year, plus £55k lump sum to last you for the rest of your life, then you may not be quite ready for retirement, however I suspect that's not the answer you want to hear. 

marmite101

jimi_man
lol...everything you said is correct and i appreciate your time you spent with me, you have given me food for thought.
thank you once again

83705628

jimi_man said:

Ah, I see what you're trying to do.
I think the first thing to say is that this is an opinion forum and people don't actually give advice, so no-one can advise you whether you are doing the right thing. Especially in this case, where getting any information out of you is like getting blood out of a stone, (I don't mean that nastily, I understand that people can be reticent to disclose information on the internet, but it has taken two pages to get here. ). So there is a limited set of facts to work from. 
My thoughts are that if you only have the £8K a year, plus £55k lump sum to last you for the rest of your life, then you may not be quite ready for retirement, however I suspect that's not the answer you want to hear. 

/
Agreed, again this is meant in the nicest way but  it sounds like the original poster could do with some 1-1 help (from an IFA, Pensions Advisory Service, HMRC/DWP and contacting the pension scheme directly).