Should I take the larger lump sum?

bluenose1

I won’t be taking the increased lump sum in my  small civil service and NHS pensions.

Was  going to but when I did a spreadsheet factoring in inflation I was surprised there wasn’t much in it as to what I would receive by age 67 when state pension starts. And that was based on quite conservative inflation figures. Definitely worth doing the figures to make an informed choice.

daveyjp

If you need the lump sum, don't assume that maximising a pension lump sum is the only option.

It may be better value to take the lowest lump sum, maximise the monthly pension and borrow the money, especially if the annual pension increases with inflation.

PennyForThem_2

I speak from personal experience - I took max lump sum 2019 from NHS pension.  I am a widow so I am cushioned by husband's DB widow pensions, my SP which I had deferred at 10% interest for several years, plus a couple of smaller pensions in my own right.  

I have a non-consolidated (not used yet) SIPP which is over the average and also extensive savings.  Why did I take the max lump sum?  Because it could be squirreled away in S&S investments and turned into ISA allowance p.a. and it would be inheritable as I did not need it.

So I am fortunate - I had a choice through luck, baby boomer, and husband/me mostly in DB pensions (and one annuity paying to me with a 4% inlation index pa - not good now but exceptional over last 10 years!)

What it amounts to is  -  your circumstances and what you want to do with your life - also whether you are a spender or a saver to a certain extent.

Also your health - don't forget that!  That might be a decision breaker.

howard3844

just another point is that the more you keep in your pension (i.e. by taking the smaller TFLS), and on the assumption there is growth over the years (as it has over the last 50 + years), the 25% future TFLS becomes greater.

AlanP_2

howard3844 said:

just another point is that the more you keep in your pension (i.e. by taking the smaller TFLS), and on the assumption there is growth over the years (as it has over the last 50 + years), the 25% future TFLS becomes greater.

Not for a DB scheme, growth is irrelevant. 

The_Fat_Controller

When I had to answer the question, the decision was pretty easy.

All I had to ask myself was "Can I live the life I want to live on the reduced pension if I take the maximum lump sum, taking into account my other savings and ISA income?"

The maximum lump sum was duly taken.

sheslookinhot

If not taking the maximum, or any lump sum, moves you into a higher tax rate then it would be a factor for taking a TFLS. As much as required to make you a basic rate taxpayer.