Civil Pension Lump Sum Payment On 60th Birthday

Kynthia

Truegho said:

Kynthia said:

Your pensions don't come with an automatic lump sum. So it seems like you've decided to give up some of your annual pension in exchange for a lump sum now. It doesn't appear that you have considered whether this is a good thing for you to do or not. Are you leaving yourself with enough to live on for the rest of your life and do you actually need a lump sum when you're going to be getting a monthly income from them?

How much annual pension have you agreed to give up? I can't understand how you are able to have agreed this with the civil service pension administrator without knowing the before and after annual amounts. If you don't know the numbers, ring them back and ask for them. 

But I haven't given up some of my annual pension for a lump sum, because they assured me that if I just took part of the Premium/Classic lump sum which I am automatically entitled to, my annual pension would NOT be deducted. However, if I did take the MAXIMUM lump sum of around £5,000, my annual pension WOULD be reduced. So you see, I have played it wise. As for the other, smaller amounts of Alpha and Nuvos, well, I have linked all those together with the Classic/Premium pension, which again, I should point out, will not be deducted from.

I think things have became confused as you previously said you had mostly Premium scheme pension with some Nuvos and Alpha when it seems you actually have Classic pension too.

Premium doesn't have an automatic lump sum but Classic does. So you are taking the Classic scheme lump sum and your Classic, and any Premium, monthly pension payments will begin as well. Both Classic and Premium have a scheme retirement age of 60, so if you're 60 then they won't be reduced in any way.

Are you saying you've also claimed your Nuvos and Alpha pensions from 60 as well? Or are you leaving them to their normal commencement ages of 65 and state pension age? Taking them from 60 will mean they pay less each year but that's a personal choice, especially if they are only small amounts.

I hope you have all the information you were looking for.

Truegho

Hi Kynthia. Thanks for your comments. I really appreciate your advice. Re. the Alpha and Nuvos, yes, I have claimed the lump sum on both of these now, at 60, as they were only small amounts and so I will be getting slightly reduced monthly amounts. But the BIG one I still haven't received is the Classic-now-Premium Pension. The Civil Service Pensions team have now emailed me a form with THREE options, but at the moment, I am still unsure which option to take.

I am, however, tending to lean towards the option of taking just £2000.00 lump sum of my premium pension (I can have the FULL lump sum, which is up to around £5000.00), but of course this will mean a £1.00 reduction for every £12.00 of the lump sum I take. Do you think this is my best bet?

However, if I was tempted to take the FULL lump sum of £5000.00, there would obviously more reductions from my monthly pension allowance. So do you think this would be the WORST option financial wise?

TVAS

This was painful to read. I didn't realise I would also get an income for life. This post was not strange it was TOTALLY bizarre!

hyubh

Truegho said:

However, if I was tempted to take the FULL lump sum of £5000.00, there would obviously more reductions from my monthly pension allowance. So do you think this would be the WORST option financial wise?

The 12:1 commutation rate is not intended to be actuarially neutral, i.e. you commuting pension for lump sum, other things being equal, will be more beneficial for the general taxpayer than you keeping the pension.

MX5huggy

I’ve not read the whole thread but the choice is £5000 today or £416 pounds of index linked annual income for the next 20 to 40 years. Take the income.  

Truegho

MX5huggy said

I’ve not read the whole thread but the choice is £5000 today or £416 pounds of index linked annual income for the next 20 to 40 years. Take the income.  

I have now had my FULL annual Premium pension confirmed by CPS, and it actually amounts to £2367.60 per year, which means I will get £197.30 per month. BUT . . . if I opt to take the £2000.00 lump sum, it will reduce the yearly amount by £166.00, so this will reduce my monthly pension to around £183.42 per month. So I must admit, I AM very tempted to take the lump sum of £2000.00, so what do you think? Taking the £2000 lump sum would be akin to taking a portion of my pension in advance, wouldn't it, which means I would then have to work out how many years that advance would cover before I just then get the bare pension of £183.42 per month.

What do you think?

Dazed_and_C0nfused

In simple terms after 12 years you will be losing money and the longer you live the more you will lose.

Lump sum = £2,000
Pension lost after 12 years is £166 x 12 = £1992

Pension lost after 25 years = £4150

That is before inflation proofing of the pension is considered so in reality it will be a bigger loss.

MX5huggy

I’d take the income for life. To get the same income from an investment would cost far more than £2k. It’s 12 years, but without inflation protection. 

What are you going to do with the £2k it’s ok to take it. You might die next year (but you’ll probably live to 84 on average) 

Truegho

Does anybody know if there is a backlog with the payment of preserved pension benefits? I have been waiting ages.

sammyjammy

Truegho said:

Does anybody know if there is a backlog with the payment of preserved pension benefits? I have been waiting ages.

No specific backlog that I know of just same everyday rubbish service, keep chasing them.