Pension: Higher lump sum or lower lump sum?

MEM62

Icicle_Boy said:

xylophone said:

Have you obtained a state pension forecast?

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

Thanks for that mate. Better than nothing, but wonders where all my tax /NI has gone these last 40 years to receive something so minuscule.

It has gone to pay for the state pension of those that retired before you, as well as to pay other benefits and a small amount going towards the NHS.  Once you start claiming your state pension, that will be paid for by those that are currently working. 

If you think that your contributions have been invested by the Government to provide an income in later life it doesn't work like that.  Private pensions may but your NI works differently in that paying it over the years 'buys' you an entitlement to claim the state pension when you reach the appropriate age. 

Albermarle

rockers said:

any financial advisor would be encouraging you to go highish risk in your current pension,

Done. My DC goes into a FTSE All Share low cost  Tracker.

Normally if you have only one index tracker it is go with a global one, rather than just a UK one.
Over the last 5 years a global tracker has gone up nearly 50%, whilst one tracking the FTSE all share has only gone up 20%.
Of course the next 5 years may be different, but missing the US out completely would be an unusual strategy.
Maybe you could have a UK tracker and a global tracker.

Qyburn

Icicle_Boy said:

I am coming up to 60, and still work in the public sector. I have a deferred pension which is payable to me when I reach 60.  
 Standard pension benefits: £16,400 per year, lump sum of £49,000
Permitted pension converted to lump sum: £13,130 per year, lump sum of almost £88,000.
  

Can you delay taking it at 60 in exchange for better rates?

Icicle_Boy

Qyburn said:

Icicle_Boy said:

I am coming up to 60, and still work in the public sector. I have a deferred pension which is payable to me when I reach 60.  
 Standard pension benefits: £16,400 per year, lump sum of £49,000
Permitted pension converted to lump sum: £13,130 per year, lump sum of almost £88,000.
  

Can you delay taking it at 60 in exchange for better rates?

I was thinking that. I am still very much working (touch wood, fit and well). Of course the thought of a lump sum and receiving £16k a year is attractive. What are the general benefits of asking to delay receiving this? I am assuming the Pension provider want to start paying this when I'm 60 as it's beneficial to  them. All the advice I am getting for everyone is brilliant and thought provoking. 

Qyburn

Icicle_Boy said:

Qyburn said:

Can you delay taking it at 60 in exchange for better rates?

I was thinking that. I am still very much working (touch wood, fit and well). Of course the thought of a lump sum and receiving £16k a year is attractive. What are the general benefits of asking to delay receiving this? I am assuming the Pension provider want to start paying this when I'm 60 as it's beneficial to  them. All the advice I am getting for everyone is brilliant and thought provoking. 

Depending on the scheme you may need more for delaying the start, in the same way you'd get less by taking it earlier. I'm really thinking about the lump sum which won't actually be used to pay off the mortgage until 2025. And I guess I was assuming if youre working you might not need the annual income right now either.

Albermarle

I am assuming the Pension provider want to start paying this when I'm 60 as it's beneficial to  them

The later they start paying it then the earlier they can stop paying it ( when you die).

Some schemes will increase the pension for each year deferred to take account of this , which is good. However many will not, so in this case by delaying it you would be doing the provider a favour.

With DB schemes a good look at the scheme rules is always a good idea, as they are all a bit different.

Turned_out_nice.

Icicle_Boy, I'm almost in the same boat as you (Civil Service Pension).
Would like to know what you decide on the lump sum? I will be in 40% tax for at least 5 years with the extra pension, however much it is whilst still working, not public sector but if I don't take the pension I'm losing out anyway.
I received my invitation to claim it yesterday from MyCSP.

rockers

Normally if you have only one index tracker it is go with a global one, rather than just a UK one.
Over the last 5 years a global tracker has gone up nearly 50%, whilst one tracking the FTSE all share has only gone up 20%.
Of course the next 5 years may be different, but missing the US out completely would be an unusual strategy.
Maybe you could have a UK tracker and a global tracker.

That sounds like a LIP approach but I've taken a look at the funds and the Global has returned 28.48% over 5 years whilst the FTSE All Share has returned 18.78% over 5 years and 71.53% over ten years. There are no figures for ten years with the global.
For me, there is enough foreign currency fluctuation built into the FTSE anyway without introducing anymore.

But at present, as I'm a pound cost averager, falling share prices are a good thing.

Pat38493

rockers said:

Normally if you have only one index tracker it is go with a global one, rather than just a UK one.
Over the last 5 years a global tracker has gone up nearly 50%, whilst one tracking the FTSE all share has only gone up 20%.
Of course the next 5 years may be different, but missing the US out completely would be an unusual strategy.
Maybe you could have a UK tracker and a global tracker.

That sounds like a LIP approach but I've taken a look at the funds and the Global has returned 28.48% over 5 years whilst the FTSE All Share has returned 18.78% over 5 years and 71.53% over ten years. There are no figures for ten years with the global.
For me, there is enough foreign currency fluctuation built into the FTSE anyway without introducing anymore.

But at present, as I'm a pound cost averager, falling share prices are a good thing.

Interestingly the best performing global index funds in the last 10 years, seems to be the ones that specifically exclude the UK.  Of course we don't know if that will be the same going forward (but I wouldn't be surprised given the parlous state of our national politics etc).

Albermarle

rockers said:

Normally if you have only one index tracker it is go with a global one, rather than just a UK one.
Over the last 5 years a global tracker has gone up nearly 50%, whilst one tracking the FTSE all share has only gone up 20%.
Of course the next 5 years may be different, but missing the US out completely would be an unusual strategy.
Maybe you could have a UK tracker and a global tracker.

That sounds like a LIP approach but I've taken a look at the funds and the Global has returned 28.48% over 5 years whilst the FTSE All Share has returned 18.78% over 5 years and 71.53% over ten years. There are no figures for ten years with the global.
For me, there is enough foreign currency fluctuation built into the FTSE anyway without introducing anymore.

But at present, as I'm a pound cost averager, falling share prices are a good thing.

Not sure what funds you are looking at, but I have just checked the following popular and well known 100% equity index tracker accumulation funds. All priced in GBP

Two Global index tracker funds/ETF

Fidelity World P - up 60% in 5 years  (US equity 70% and UK 4% )
VWRL   - up 53% in 5 years( US 60% and UK 4% ) 

Two UK all Share trackers .

Halifax - up 20% in 5 years
Vanguard - up 19% in 5 years

Plus for good measure 

Vanguard LS 100 - up 45% in 5 years ( 50% US and 25% UK ) 

Of course the next 5 years could be different, but I do not think very many would recommend being 100% in UK.