Pension Lump Sum....What do people do with it?

crv1963

Aristarcus said:

crv1963 said:

jimi_man said:

I can confirm in respect of the police one, that’s correct. No matter how much lump sum you’ve taken, the wife/husband gets 50% of the full pension. Unless they marry again, in which case it stops. 

The same is true of NHS, except the spouse can marry again and still get the survivors pension. The size of my lump sum and however much I reduce my own pension has no bearing on my wifes entitlement upon my death.

Its interesting that it is different dependant on the pension. I think local government (GMPF) survivors pension ends upon remarriage as well?

That's what I thought would happen i.e. Survivors Pension end on re-marriage but I was told "no, you've earned/ paid for that pension so on your demise and once in payment it will not be reduced or removed if the surviving spouse co-habits or remarries as it is their pension, not yours, which is also why the size of lump sum you take has no impact on anything your wife may get".

pensionpawn

Clear high interest debts first, although think carefully about clearing an ultra low interest mortgage. Put some aside for riding out (another?) market downturn. Then, if your other half is playing catch up with their pension, live off any remaining amount of TFLS so that your other half can dump as close to 100% of their salary (<£40k) into their pension. Not only are they getting a 20% top up on their contributions, you are also working towards making the most of both of your personal allowances (£25k tax free) in drawdown. If you still have some TFLS remaining, then, if you are still working you can increase your own pension contributions by 30% before potentially triggering recycling rules. Finally, use it to keep your pension topped up by £3600 pa (£2880 net) until age 75, after you eventually give up work.

bigadaj

Durban said:

Thrugelmir said:

arnoldy said:

For a typical pension 10 – 11 years of 5% inflation would wipe nearly a quarter off the real value of the pension (assuming on average its capped at 2.5%).

When was inflation last at 5%. Not on the horizon either. 

I sincerely hope it isn't but I don't think that it is beyond the realms of possibility.

All the Quantitive easing and surely the government could be tempted to inflate the massive borrowing away?

they've been doing that for 12 years so far, whether you think they have been effective depends on where you think things would have been if a different policy had been followed. The other thing is that inflation is very individual, many people's inflation rate will be far higher then any of the published rates.

1813

Mine isn't overly large (around 17k) and have about 21 years to NPA - so won't go far. I did consider taking it at 68 but even then, where in 20-30 years is a lump sum of around 20-30k, dependant on age, going to get me? I appreciate its not money to be sniffed at, but not being a homeowner, uts going to be tough, I think, but I don't know being a member of the premium scheme in the Civil Service, what my full options are, but I just assume they are, as they are.

jamjar92

Reading this thread it depends on the type of pension you are recieving. Mine's a DB pension. With the lump sum I will paydown the mortgage with the amount in my AVC currently with its projected value at retirement, and could have some left over depending how much I overpay. All other debts should be cleared by then.

What pension amount are people in pension DB scheme planning on taking, at today value?

People I know who already retired have always taken the max lump, and invested some of the money so they if I die, there is a pot of money left for family as the pension just stops (apart from spouse pension of course). From that pot I can draw down as required if I do not die and enjoy life to the max without worries. (thats the plan anyway).

After 7 years I will get the state pension boost. As others have said I plan to put as much into the AVC (more in the last year) as I can between now and retirement.

crv1963

jamjar92 said:

Reading this thread it depends on the type of pension you are recieving. Mine's a DB pension. With the lump sum I will paydown the mortgage with the amount in my AVC currently with its projected value at retirement, and could have some left over depending how much I overpay. All other debts should be cleared by then.

It also depends on spouse pension provision and plans of what to do in retirement. I have taken the max TFLS from my DB Pension- also continue to work, we're putting money into a SIPP for me to reduce down to BRT and into a SIPP for my wife to boost her income in retirement- I will always be a taxpayer she will not be, until my demise.

IAMIAM

jamjar92 said:

Reading this thread it depends on the type of pension you are recieving. Mine's a DB pension. With the lump sum I will paydown the mortgage with the amount in my AVC currently with its projected value at retirement, and could have some left over depending how much I overpay. All other debts should be cleared by then.

What pension amount are people in pension DB scheme planning on taking, at today value?

People I know who already retired have always taken the max lump, and invested some of the money so they if I die, there is a pot of money left for family as the pension just stops (apart from spouse pension of course). From that pot I can draw down as required if I do not die and enjoy life to the max without worries. (thats the plan anyway).

After 7 years I will get the state pension boost. As others have said I plan to put as much into the AVC (more in the last year) as I can between now and retirement.

This is the problem with DB schemes. Most if not ALL civil service pensions will not allow transfer outs with CETV which is a concern if you have ill health or short life expectancy. I would hate to be in a position where you only draw 3/4 years and suddenly pass away and all the DB scheme 'money' is lost. Who knows, in 25 years, they may allow CETV transfer out from DB schemes again....

femalemonarchfemalecanine

I'm having my kitchen extended with my lump sum, it'll make my life so much easier.

Pile_o_stone

I'll be taking the lumpsum and I'll invest the maximum I can into my wife's pension and the rest will go into an ISA. This will allow us to make sure we max out my wife's pension earnings to the full £12,500 tax free allowance, max out my tax free allowance and then the rest of our income will be from the tax free ISA. Any monies invested in my wife's pension will get a 20% tax rebate uplift and the monies in the ISA will be invested in the same funds as my pension so will make the same gains - however, unlike my pension, the income taken from the ISA is not subject to tax.

After being a high-rate taxpayer most of my working life, my aim in retirement is to pay as little tax in retirement as is legally possible, yet still maintain my current lifestyle.

jamjar92

IAMIAM said:

This is the problem with DB schemes. Most if not ALL civil service pensions will not allow transfer outs with CETV which is a concern if you have ill health or short life expectancy. I would hate to be in a position where you only draw 3/4 years and suddenly pass away and all the DB scheme 'money' is lost. Who knows, in 25 years, they may allow CETV transfer out from DB schemes again....

You can with a LGPS scheme, but you need an IFA. My planned escape is in 8 years, I will be working within boundaries of LGPS scheme. I will be taking schemes lump sum, AVC's and take what I think at the time is a reasonable yearly pension for a couple and convert the remainder. The other half will be taking early retirement in about 4 years.