Selling the Golden Goose? (DB scheme pension swap for lump sum)

sheslookinhot

I will take a reduced lump sum, approx 150k from a 200k+ possible, purely to keep me from being a higher rate taxpayer. The TFLS will be put to good use.

Shedman

Another valid reason in my view to consider taking a chunky PCLS (particularly if the commutation rate is reasonable) is if your spouse doesn't have much in the way of a pension in their own right so that, if you should pop your clogs early,  there an extra pot of cash/investments that the spouse has available.

Especially if, as in most DB schemes, the 40-50% spousal pension isn't affected, so that it remains at that percentage of the pre-reduction pension, regardless as to whether a lump sum is taken and the main pension gets reduced.   

Nebulous2

I had shuffled my pension around various LGPS schemes when I moved posts. Possibly it wasn't the best thing to do, but consolidating them seemed sensible.

My last move put me all into the 2009 scheme - so I ended up with 32/60ths (years)  in a pension which only ran for 6 years. That meant I had no automatic lump sum. I could have commuted around a third of my pension, but decided against taking any.

With current inflation levels I'm pretty happy with that choice. 

Kim1965

In a scenario of a much reduced life expectancy, coupled with only a 37.5%spousal pension, would it be wise to take the max lump sum regardless of commutation rate?
Db pension is unfunded, so no cerv available. 

Notepad_Phil

Kim1965 said:

In a scenario of a much reduced life expectancy, coupled with only a 37.5%spousal pension, would it be wise to take the max lump sum regardless of commutation rate?
Db pension is unfunded, so no cerv available. 

I wouldn't say it would be wise regardless of commutation rate but it might make a lower rate more reasonable to take - it would still depend on what other pension the spouse has and what inflationary protection their pension has, how confident they are with money, what inflationary protection this pension has, what you would do with the lump sum etc. 

Personally, if this pension had very good inflationary protection then I'd be inclined to still take the maximum pension available so that I could pass on the maximum spousal pension to Mrs Notepad so that I knew she had a good foundation for the future as she has little pension of her own. But if she had a lot of good inflationary protected pension of her own then I'd be more inclined to take the bigger lump sum.

Nebulous2

Kim1965 said:

In a scenario of a much reduced life expectancy, coupled with only a 37.5%spousal pension, would it be wise to take the max lump sum regardless of commutation rate?
Db pension is unfunded, so no cerv available. 

I'm no expert - but you need specific advice, based on a lot more detail.

For instance, if it is a public sector pension it is possible that commuting some of the pension, doesn't reduce the spousal pension. 

In what must be a difficult time - is there a need to retire? Can they get an ill-health retirement? All of that would require a lot of medical information, which isn't really suited to this forum...

Hopefully that isn't too insensitive, but I hope it works out for you, weigh it up carefully, quick decisions might not be the best. 

Kim1965

Nebulous2 said:

Kim1965 said:

In a scenario of a much reduced life expectancy, coupled with only a 37.5%spousal pension, would it be wise to take the max lump sum regardless of commutation rate?
Db pension is unfunded, so no cerv available. 

I'm no expert - but you need specific advice, based on a lot more detail.

For instance, if it is a public sector pension it is possible that commuting some of the pension, doesn't reduce the spousal pension. 

In what must be a difficult time - is there a need to retire? Can they get an ill-health retirement? All of that would require a lot of medical information, which isn't really suited to this forum...

Hopefully that isn't too insensitive, but I hope it works out for you, weigh it up carefully, quick decisions might not be the best. 

Not insensitive at all.
Applying for my psrtners ill health retirement now, the doctor from the lgps has already waived it through. It took him 10 mins. My wife cannot work, chemo, v strong opioid painkillers. 
 Basically, i have some inflation proofed db pension, some dc and have some financial savvy. 
 Cannot make any decisions until we see figures, applying for deferred lgps and active tps with enhancement. 
Lgps 50 %spouse pension, tps 37.5%.
I was not aware that in ill health retirement taking a lump sum may not reduce spousal pension. Is that the case if the maximum was taken?
 Also probably claim Esa, and leave her dc pots alone, i still work and can easily cover our outgoings. 
 

Albermarle

I was not aware that in ill health retirement taking a lump sum may not reduce spousal pension

I do not think that is specific for ill health retirement, it is quite common.

Nebulous2

Kim1965 said:

Nebulous2 said:

Kim1965 said:

In a scenario of a much reduced life expectancy, coupled with only a 37.5%spousal pension, would it be wise to take the max lump sum regardless of commutation rate?
Db pension is unfunded, so no cerv available. 

I'm no expert - but you need specific advice, based on a lot more detail.

For instance, if it is a public sector pension it is possible that commuting some of the pension, doesn't reduce the spousal pension. 

In what must be a difficult time - is there a need to retire? Can they get an ill-health retirement? All of that would require a lot of medical information, which isn't really suited to this forum...

Hopefully that isn't too insensitive, but I hope it works out for you, weigh it up carefully, quick decisions might not be the best. 

Not insensitive at all.
Applying for my psrtners ill health retirement now, the doctor from the lgps has already waived it through. It took him 10 mins. My wife cannot work, chemo, v strong opioid painkillers. 
 Basically, i have some inflation proofed db pension, some dc and have some financial savvy. 
 Cannot make any decisions until we see figures, applying for deferred lgps and active tps with enhancement. 
Lgps 50 %spouse pension, tps 37.5%.
I was not aware that in ill health retirement taking a lump sum may not reduce spousal pension. Is that the case if the maximum was taken?
 Also probably claim Esa, and leave her dc pots alone, i still work and can easily cover our outgoings. 
 

As Albermarle said it isn't specific to ill-health retirement. As I said further up I didn't take a lump-sum, but if I had done it wouldn't have affected my survivor pension at all.

Has she / you had any advice from anyone? Is she in a Union? A lot of Union reps aren't very knowledgeable about pensions, but they do generally have specialist advice to call on. 

Read the pension scheme handbook, which is likely to be available online, detailing what ill-health pension benefits are available and what impact taking a lump sum has. 

LGPS pensions often come with a guarantee as well, mine is guaranteed for 5 years. 

I hope it works out for you both, but getting the options, facts and figures, including the ill-health retirement will be essential to make informed choices. 

littleboo

I have been thinking about this, I have a DB scheme covering the the majority of m,y working life, deferred, and  more recently, a DC scheme.  For the DB scheme, the wisdom from the "old lags" seems to be to take the max lump sum, the logic being that you want to get the most out of the scheme and you might die early in retirement. A rough check suggests that the difference in pension and lump sump for the standard lump sum and max lump sum is  £3200 pa/£74,000. So is the commutation factor simply 74/3.2=23?