Lump sum or take small pension?

webster460

Hello, my wife has has an AVC mature in March. It is valued at around £27k, she has been given the choice of taking it all as a lump sum, 25% lump sum annually for 4 years or around £380 a year pension. 
Which is going to be the best option to take??
She is edging towards taking the lump sum and putting it into premium bonds! 

Brynsam

Best option will be the one which is most likely to meet your objectives - and you've not said what those are.

Putting it in premium bonds is about the same as putting it under the mattress, so unless that's your plan, maybe not that!

arnoldy

Lump sum, no question in my mind.
Good multiple, even if paying 20% tax on the whole thing after the 25% free about £23k = £690pa invested in an ISA on the FTSE All Share. Also could be drip fed into a new or existing SIPP.

Dazed_and_C0nfused

Does she have any other taxable income?

webster460

Still working full time. 

Dazed_and_C0nfused

webster460 said:

Still working full time. 

So she's likely going to have to pay between £4k and £8k in tax on the taxable element.

Has she factored that in to her thinking?

dunstonh

Which is going to be the best option to take??

Are they are the only options?

What about keep it?

Use it for the lump sum from the main scheme? (not always available)

ad hoc lump sums as and when she wants them?

flexi-access drawdown - regular income?

Still working full time. 

so, why does she want to take it out?

webster460

It's from an AVC set up years, ago to run alongside a long gone mortgage. She'd forgotten about it, but was contacted recently about it. Totally unexpected and not factored into her current, very healthy, pension portfolio. 

dunstonh

It's from an AVC set up years, ago to run alongside a long gone mortgage.

Are you sure?  AVCs were only issued alongside occupational pensions (typically DB pensions).   Until 2006, there was no ability to take any lump sum from an AVC.    So, it cannot have been used to run alongside a mortgage.

She'd forgotten about it, but was contacted recently about it. Totally unexpected and not factored into her current, very healthy, pension portfolio. 

So, why not add it to that portfolio and take it when she needs it?

billywhizz1966

Looks like the AVC should be taken as lump sum unless she is going to be very long lived (looks about 60 years until she is better off) with inflation less but my advice is take it as a windfall and enjoy it whilst young enough