NHS Pension lump sum x 3 different figures

duckychick

I intend to take my pension this year on my 55th birthday. I have received my statement of benefits but for each section (1995 an 2015) there are 3 different lump sum figures. I have no idea why there are 3 different ones and which ones I can choose.  Could anyone explain ?  Many thanks

JoeCrystal

Ask your pension administrators, perhaps? Does your statement of benefits explain anything about it? What does it say beside each lump sum?

duckychick

it has benefits payable on the date ive requested and states has been reduced to take into account early withdrawal then it says at retirement you can increase your lump sum retiring allowance by exchanging some  of your pension, it then has 3 further sets of figures, im wondering if these figures are for my actual retirement age if I didnt take this year and left it until age 65? its very confusing and NHS pensions do not give any advice about the figures, they just supply them! 

xylophone

at retirement you can increase your lump sum retiring allowance by exchanging some  of your pension, 

Is this on the basis that you can reduce the annual pension in return for a lump sum? This is known as commutation.

https://www.nhsbsa.nhs.uk/employee-section/understanding-my-statement/maximum-lump-sum

duckychick

Yes I intend to reduce the annual pension for lump sum buy they have provided me with four different sets of figures to do this i.e. four different amounts of maximum lump sum and I am unsure why this is? 

NottinghamKnight

There should be an equivalent annual pension against each of the lump sum option. If you compare the reduction in annual pension against the lump sum this will give you the commutation rate. So if you get £10k lump sum and exchange that for £1k of pension then that gives you a commutation rate of 10. The inverse of the commutation rate shows how much you would have to earn in interest or investment, in this example you would need to get 10%. More realistic rates might be 20 or 30, so needing an interest return of 5% or 3.33%; whatever that figure is then it's obviously very difficult and probably impossible to get that return, risk free, anywhere else.

duckychick

thanks for the replies everyone, i have booked myself an appointment with pensionwise to discuss before I make any decisions. 

garmeg

duckychick said:

thanks for the replies everyone, i have booked myself an appointment with pensionwise to discuss before I make any decisions. 

I dont think Pensionwise can help regarding DB schemes. To be honest they weren't of much use, in my experience, regarding DC pensions either. However if you have no pensions knowledge at all, I guess they could be of some use.

xylophone

four different amounts of maximum lump sum and I am unsure why this is? 

For your information and guidance so that you know the most you can take as a lump sum?

For example, suppose you are told the maximum is £20,000.

You might  choose less than this (and take a bigger pension) but you cannot choose more.

dimbo61

I think for the NHS you lose £1 of pension for £12 extra lump sum.
There is a max lump sum IE 25% of your pension 
Example £10,000 pension and £33,000 lump sum 
Or £8166 pension and £55,000 lump sum 

saucer

dimbo61 said:

I think for the NHS you lose £1 of pension for £12 extra lump sum.
There is a max lump sum IE 25% of your pension 
Example £10,000 pension and £33,000 lump sum 
Or £8166 pension and £55,000 lump sum 

That's right.  Generally speaking, unless you believe you are not going to live that long into retirement, crudely 12 years (ignoring inflation) you are best taking the maximum annual pension, rather than lump sum.