Pension - reduced life expectancy

Tax_Slave

Hi - I’m 59 and a half and I have a final salary pension that starts in December.
I already have another final salary pension that has been paying monthly since December 2021.
Also have a pension fund with £400,000 (approx.) in it that is fully invested and growing ….hopefully.
My wife had a pension fund of £100,000 (approx.) that is invested.

Due to a blood cancer diagnosis my life expectancy is reduced. Odds of living another 5 years is 45% or 10 years 30%.


Both final salary pension have a widows pension that pays 50% of pension on my death.

I think this a no brainier , unless I have missed something.
For the final salary pension that starts this December a tax free lump sum and reduced pension is an option.
The lump sum divided by reduction in pension is 28.
The widows pension is not impacted and stays same taking lump sum or not.

I think I should take the lump sum and reduced pension for what ever years I have left?

anonmoose

Hi Tax slave,

As no one has responded yet I just wanted to say I am sorry to hear about your diagnosis. I am sure one of the regulars will be along today and give you advice from a financial point of view.

I am no expert but if it was me I would be taking the lump sum and using it to enjoy the time I have. 

Will your wife get full SP also?

Kim1965

My wife is in a similar position but shorter life expectancy. The spouses pension on most of her db pensions is 37.5%, i would think taking the max lump sum in these cases is the right thing to do. 

Tax_Slave

@Anoneemoose - Yes wife is to get full state pension….
Well currently at £11 short until I make 2021/2022 NI contribution.

Tax_Slave

@Anoneemoose - I have made full contributions to state pension with about 39 years NI.
I understand wife can’t get a widows pension or use my NI record for her own.
So last year we made up missing years for NI on hers.

MX5huggy

I think you are on the right track. But have you investigated transferring out of the DB scheme to a DC? A subject covered extensively on here. Some schemes it’s not possible (NHS). The value transferred can be very generous, reflecting the cost saving to the scheme of not paying pension for many years with inflation protection. I think your personal life expectancy does not effect the transfer offer. 

anonmoose

To me it sounds like you are in good shape and there is good provision for your wife so I would allow yourself to enjoy your pot!

 Definitely worth looking into what huggy has said though.

My Dad was diagnosed with a degenerative life limiting condition when I was in my teens. He led a very simple life and we never went on holiday or spent money on anything but the absolute basics. Soon after he was diagnosed he cashed a big chunk of his savings and booked himself and a pal on a holiday of a lifetime.  This was massive for him and he got a lot of stick from the family for it who thought he had gone completely crazy!

I thought it was brave to get out of his comfort zone and scratch a travel itch while he could that had probably been there for years.  His pleasure lasted long after he got home as he would tell me tales of this far away land. To me back then a young teen having never travelled I was in awe.

Even now many years after he is gone it provides me comfort that he did something for himself for once.  Some day I hope to visit where he did and raise a glass to him.  

I think like toucan said on another thread, sometimes you just need to seize the day. (Apologies for the sentimental post, but this thread made me think of my dad the explorer )

Tax_Slave

@kim1965 -

Kim1965 said:

My wife is in a similar position but shorter life expectancy. The spouses pension on most of her db pensions is 37.5%, i would think taking the max lump sum in these cases is the right thing to do. 

Sorry to hear you are in a similar position.
My chemo head with strong steroids integers with thought process and I missed your reply earlier.
I have gone from remembering PI to 100 decimal places (I was bored on a 2 hour train trip) to now processing any info being a struggle.

I wish your wife all the best and you also.

Only positive is that knowing how long you have does help pension planning.
Even thou that’s dark humour I know.

Albermarle

MX5huggy said:

I think you are on the right track. But have you investigated transferring out of the DB scheme to a DC? A subject covered extensively on here. Some schemes it’s not possible (NHS). The value transferred can be very generous, reflecting the cost saving to the scheme of not paying pension for many years with inflation protection. I think your personal life expectancy does not effect the transfer offer. 

OP - You should give the above suggestion some serious thought, and at least do not put this DB pension into payment ( or take any lump sum ), in December until the alternative option of transferring it out to a DC pension is investigated.
There are quite a lot of relevant points .
Already mentioned above is that some public sector schemes do not allow it.
Due to various hurdles it can be difficult to go through the transfer process successfully. However having a life limiting disease and other pensions can make it easier , although a specific process  has to be followed.
The Lifetime Allowance can become a problem if the DB pensions and the transfer value are quite significant, considering you already have a £400K DC pot .
The big advantage is that you could most likely leave your wife with a lot more money, than she would have otherwise.
To facilitate a pension transfer you will need to engage a specialist financial advisor. Most likely they will want to manage the pot if the transfer is successful ( and your £400K pot and your wife's £100k pot as well) . With some likely difficult years ahead of you both in future you may wish to consider this option, which would at least hopefully help if someone else was able to deal with investment , income, tax issues etc .

JOHNBOY42

MX5huggy said:

I think you are on the right track. But have you investigated transferring out of the DB scheme to a DC? A subject covered extensively on here. Some schemes it’s not possible (NHS). The value transferred can be very generous, reflecting the cost saving to the scheme of not paying pension for many years with inflation protection. I think your personal life expectancy does not effect the transfer offer. 

this has got to be done...... sorry to hear your position but really look into this 

TadleyBaggie

Are you sure about life expectancy numbers, I was diagnosed with a blood cancer at 66 but was told with treatment I could expect a normal life expectancy (unless it mutates in a more aggressive type).