DB Pension options.

hugheskevi

garmeg said:

And I stand by my comment that educated people will live longer,

You should stand by it - OECD evidence suggests a gap of around 5 years for life expectancy at 30 years of age between those with the lowest and highest educational achievements. The effect of education is more pronounced for male life expectancy than female.

aberamagold

etienneg said:

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

aberamagold said:

Wife is 62 working part time and gets half my pension if i die first what ever route i go down.

I agree that planning is essential, but it has to be on the correct facts.
It is common (although not universal) for the spousal part of a DB pension NOT to be reduced because the lump sum is taken. So daveyjp's assertion (about a lower annual spousal pension) has no basis in fact.

I'm not arguing for or against taking the lump sum, simply that all relevant facts need to be taken into account. This includes the fact the the lump sum is tax free and (in this case) the spousal pension is the same with or without lump sum. The opposite scenario to daveyjp's is that you don't take either lump sum and die the day after retirement! With two DB pensions, you might choose to hedge your bets and take one lump sum, leaving the other as a full pension with index linking.

One more point: Are you sure that the whole pension increases with cpi/rpi? Often the pre 1998 part (for example) has no index linking, or a reduced/limited percentage. Just check to be sure you are basing your decision on the correct facts!

Pension 1 is  Rolls-Royce pension and increases by CPI although the pre 1997 bit states.....2% increases will occur in the years 2020, 2021, 2022 and 2023. From 1 April 2024, increases of up to 2% a year will apply as long as the Fund retains a surplus of at least 105% on a basis set out in the Trust Deed and Rules.
Pension 2 increases by RPI according to last statement i received.
Both pensions are guaranteed for first 5 years and then wife gets half.
I am tempted to take the full or partial lump sum out of Pension 2.

IAMIAM

I would take both lump sums personally, an annual salary of 20k with no pension deductions no national insurance deductions and a state pension round the corner is ample to live on until death. I also do not like DB pensions in the sense that you can rarely transfer out these days, meaning you could drop dead in a year and loose everything or indeed be the 50% that doesn't live beyond 20 years.....YOU CANT TAKE ANYTHING WITH YOU....is what I say.

Mutton_Geoff

NottinghamKnight said:

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.

It's also important to consider the loss of the indexed pension. In 20 years, the value of money will have halved so the defined benefit is often better in the longer term.

I decided to commute some of my pension (at 20x) to take the max amount of TFC. I did it on the basis that I'm fortunate to have pensions that will mean paying high rate tax so after tax, but not accounting for inflation, it would take me 33 years to earn back the same money from my pension. I can use the money for booze, birds, and fast cars. The rest I'll just waste (George Best RIP)

BobQ said:

As Amy Whinehouse said ..

She wasn't that bad ;-)