To Leave it or Lump it?

Tiki30

I'm sure I'm thinking about it wrongly but I seem stuck with the thought that the tax man is "giving" me 20% plus I'll get say min 2% in a savings account each year versus getting extra 2.5% compounded over  (hopefully) at least 20 years.

Dazed_and_C0nfused

Tiki30 said:

dunstonh said:

Tiki30 said:

If in very fortunate position not to need the lump sum from private DB pension would it be better just to leave it and have increased annual pension? Lump sum is around 110k v around 6k annually increasing with CPI or 3%. Age 65, no dependants, decent health.

Which fits best with your wider circumstances?  Decisions like these may have one method better than the other on paper but when you factor in circumstances it could sway it the other way.

You don't need the lump sum now but what about later? 
Is there a spouse/partner whose retirement planning is not as good as yours? (you could use excess lump sum to improve their provision  - although you could also potentially use the income to feed their provision but risk of early death)
What is your income tax position throughout retirement?

Unlikely to need later but of course never say never, can only make decisions based on what I think right now.
No mortgage or debts and just me myself and I to think about in terms of my finances.

I expect my income tax position to be maintained at basic rate.

Maybe now is the time to splash out and treat yourself to something you would never normally have considered buying?

Tiki30

I plan a new car and work on the house but have already factored those into current finances.

Albermarle

Tiki30 said:

I'm sure I'm thinking about it wrongly but I seem stuck with the thought that the tax man is "giving" me 20% plus I'll get say min 2% in a savings account each year versus getting extra 2.5% compounded over  (hopefully) at least 20 years.

Now you have clarified that it is only CPI capped at 2.5% ( which is not great) then it does maybe kind of swing things  more in favour of the untaxed  lump sum . Probably it is a bit 50:50 .

Secret2ndAccount

I'm with dunstonh on this one. The offer is balanced. You won't make yourself rich, or poor, by choosing one way or the other. Take a look at your life and ask when/how you would be most likely to need or want this money. Will your spending go down as you get older (less active) or up (gardeners and care homes)? When would the extra money be most useful to you? Think about some what if's - unexpected happy or sad incidents. It seems maybe you can afford to up your spending a little.
The great thing about DB's is the security they provide. However, you seem to be financially secure already, and the inflation linking on this one isn't great. So if there's something you'd like to buy, maybe now is the time...
Decide what makes you most happy, not which way pays out a few quid more.

hyperhypo

I tried to apply 2ndSecAcc  approachwhen considering same issue as OP..with commutation at X23 against RPI protection of RPI 10%. Although in my case I needed some cash out of the dB to bolster cash income until SP age...also...to avoid selIing other invested assets in next 3 years when SP commences.
I started...and eventually ended up.. taking half of the available cash. I probably could have managed on 1/3 pcls... but a not insignificant chunk of it has just been graciously forked out to go and watch Queen play live. Next Year some Opera somewhere in Europe perhaps....Which necessitates a modest cash ad hoc luxury fund which isn't for emergencies....and not serviceable from general expenses.

Tiki30

I'm still undecided, more so as a few people above have confirmed for me that it's swings and roundabouts really. I still have a few weeks before I need to sign the paperwork so I'll continue to ponder for now.
Thank you all for sharing your thoughts. 

Tiki30

Just an  update

I've gone for the lump sum.

Contributors here helped me decide so tnx again one and all.