DB Pension options.

aberamagold

I have been searching this forum recently to read posts about taking a lump sum from a db pension and found the information helpful. Although i would welcome any comments on my situation.
I am male nearly 65 and recently took voluntary redundancy. As it stands i have 2 deferred db pensions and need to decide my options soon.
Pension 1 is annual pension of  £20214 or lump sum of £91912 and reduced pension of £13786. Pension increases with cpi.
Pension 2 is annual pension of £9527 or lump sum of £48592 and reduced pension of £7288. Pension increases with rpi.
With a commutation of over 21 I am tempted to take the full lump sum out of Pension 2 and take no lump sum out of Pension 1. As I am soon 65 does this look a good option?
Or maybe take the lump sum out of both pensions?
I have no mortgage, debts, and have about 150k in savings and in general good health. Wife is 62 working part time and gets half my pension if i die first what ever route i go down.
  

Dazed_and_C0nfused

Why do you want to take a lump sum at all?

aberamagold

Have no immediate plans to spend any lump sum cash. Just that with taking the Ls out pension 2 i would need to live past 86 to lose out.

barnstar2077

If you dont need the money yet then you have the hassle of finding a suitable place to put it where it wont be eroded by inflation.  I think I would take the gauranteed pension instead, unless you plan on gifting the lump sum. 

shinytop

I had a similar decision to make learlier this year and did not take either of my DB lump sums.  21x is quite a good commutation rate, especially since it's tax free compared to taking the income. But it doesn't look like a significant amount for you overall and as barnstar says, probably not worth the effort unless you want/need the cash.  Also, if you took the lump sum, one danger is that you'd just live off the reduced income and never spend it. 

NottinghamKnight

aberamagold said:

Have no immediate plans to spend any lump sum cash. Just that with taking the Ls out pension 2 i would need to live past 86 to lose out.

I would guess you haven't allowed for inflation in that calculation, though assume the lump sum is tax free, A commutation factor of 21 implies a return of a little under 5%, say 3.5% allowing for tax, where can you get that at the moment on pretty much risk free money.

Albermarle

As others have said before taking either lump sum, you have to think about what you will do with the money.
If you had plans to spend it on say on major home improvements , flash new car , fancy holidays, big gifts to family or charity  etc then it would make more sense to take the lump sum(s), than if you the money would just sit in a low interest savings account.

garrob

In regards to taking the lump sum payment from a DB Pension, my view on it is if you don’t take the lump sum and god forbid something happens to you, then all that money is gone and your spouse is left with half of your pension. I’m sure we all know someone that has passed away early in retirement, my Grandfather retired at 65 and died at 66.

Albermarle

garrob said:

In regards to taking the lump sum payment from a DB Pension, my view on it is if you don’t take the lump sum and god forbid something happens to you, then all that money is gone and your spouse is left with half of your pension. I’m sure we all know someone that has passed away early in retirement, my Grandfather retired at 65 and died at 66.

We all know someone who retired and then died soon afterwards ( in my case a colleague) 
However the statistics are that a 65year old man will on average live another 20 years and a woman 22 years.
That means 50% will live longer than that . If you have no very bad habits and are educated with a past career at a desk, with little money worries then it is likely you will be in that 50% .

daveyjp

garrob said:

In regards to taking the lump sum payment from a DB Pension, my view on it is if you don’t take the lump sum and god forbid something happens to you, then all that money is gone and your spouse is left with half of your pension. I’m sure we all know someone that has passed away early in retirement, my Grandfather retired at 65 and died at 66.

Or you take the lump sum and don't spend it "just in case". You then end up in a care home and its gone in less than a year.

Spouse then has no lump sum and a lower annual pension.

These scenarios are why planning is essential.

Albermarle

Usually the Spouse pension is not affected by whether you take the lump sum or not , but each DB scheme has different rules, so worth checking.