Taking early retirement soon, confused about max lump sums, level pensions etc.

Mike_59_England

Good morning.
I am retiring aged 58 this July.
I have a Final Salary Pension with AVC.
Clearly I am not asking for advice but I'd like to understand how others feel about the various options.

I can take a minimum lump sum (the value of my AVC on the day) and yearly pension.
I can take a maximum lump sum (about 40k more) and a reduced yearly pension, that looks small to me.
I can take a specific lump sum which is currently what I am thinking.
Then there is a level pension option that falls off when I get to 68, honestly does not look worth it.

I'm going early due to poor health but I don't suffer from any of the defined illnesses that limit life, non smoker etc.

Got to make a choice soon so I'm looking for opinions.

Many thanks.

Mike

Albermarle

You will get better answers if you actually provide some figures/more specific details.

Mike_59_England

Albermarle said:

You will get better answers if you actually provide some figures/more specific details.

You want to know my actual pension amounts? 

Robin9

Do you actually need the lump sum (say to pay off mortgage or new bathroom etc).

leosayer

There was a similar question yesterday - have a read of that.

https://forums.moneysavingexpert.com/discussion/6439124/

Albermarle

Mike_T_1965 said:

Albermarle said:

You will get better answers if you actually provide some figures/more specific details.

You want to know my actual pension amounts? 

If possible, it would help.

Nebulous2

Are you in a public sector pension? 

What is the commutation rate- the amount of pension you need to give up for a lump sum? 

A lot of the public sector ones are 12:1,  you give up £1000 pension for £12000 lump sum. That is generally seen as quite a poor rate. 

Basically you are taking a gamble on how long you live. Because of an anomaly with transferring my pension I didn't have a standard lump sum at all, I would have had to give up pension to get one, and I didn't take any. 

Then you need to take into consideration any need for a lump of cash. If you still have a mortgage to pay-off, you've mentally committed to a huge holiday, or to a new car, as a retirement gift and the lump sum is the only way to get it, then you might take one or take a bigger one. 

af1963

Also worth considering: what inflation protection does the pension have ? If it grows by RPI or CPI with no restrictions, that's a point in favour of choosing a higher regular pension and lower lump sum - because your income value is then protected. If the pension increases are restricted to a low value, likely to be less than actual inflation, that makes a stronger argument for taking the tax free lump sum up front. ( Although you may then need to save or invest it yourself to provide some inflation-protection.)

Going for a pension that reduces when you hit 68 might make sense if you needed more cash in the short term to get you through to when your state pension kicks in (at 67) but thought you'd be OK once that started.

Marcon

Mike_T_1965 said:

Good morning.
I am retiring aged 58 this July.
I have a Final Salary Pension with AVC.
Clearly I am not asking for advice but I'd like to understand how others feel about the various options.

I can take a minimum lump sum (the value of my AVC on the day) and yearly pension.
I can take a maximum lump sum (about 40k more) and a reduced yearly pension, that looks small to me.
I can take a specific lump sum which is currently what I am thinking.
Then there is a level pension option that falls off when I get to 68, honestly does not look worth it.

I'm going early due to poor health but I don't suffer from any of the defined illnesses that limit life, non smoker etc.

Got to make a choice soon so I'm looking for opinions.

Many thanks.

Mike

Without knowing a lot more information - your other financial provisions, expected outgoings, attitude to risk etc etc, how anyone 'feels about the various options' won't make much sense or be relevant to your particular needs. The only opinion which really matters is your own. In particular, how would you invest any lump sum you might take?

xylophone

Have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

Do you own your own home mortgage free?

Are you married and if so will your spouse be largely dependent on your pension?

What is the commutation factor for your scheme pension?

How will your pension increase in payment?

I am assuming that this is not a public service pension.

Do you have pre and post 88 GMP?

If you take a lump sum, what are your plans for it?

Mike_59_England

Many thanks for all the replies.
A lot to consider.
Many asked if we needed the max lump sum. The answer is based on the fact that if I should die my wife only gets 50% of the pension amount, therefore taking the larger lump sum protects that tax free cash for her later and is invested to provide additional income for us both in the meantime, there is no specific lump sum requirement.

I'm taking early retirement (aged 58) because of poor health and changes in the job that make it near impossible to cope.
Disability that is not supported etc.

I'm honestly worried about putting figures in public like this but I do want all the help understanding options I can get so here goes.

Pension will be CPI protected.

£21244.22 pension and £79700 Minimum lump sum.
£17926.64 pension and £119510.96 Maximum lump sum
Specific lump of 90K and £20385.89 pension (currently my preferred option)

Level pension options (Very unsure as I don't trust the government not to make state pension age 100 soon lol)

Level pension minimum lump sum £79700 lump and £23595.78 to age 67 then £18222.01 + state

Level Maximum lump sum £129589.07 lump and £19438.36 to age 67 then £14064.59 + state

So there you have all the details I can find so far.

I have to indicate my preferred options soon.

Many thanks

You can get your State Pension on 29 May 2032

Your forecast is £203.85 a week, £886.38 a month, £10,636.60 a year, says I need to continue to pay NI?