Should we take the lump sum or increased pension?

RogerPensionGuy

2nd_time_buyer said:

As @ewaste says you should have plenty to achieve the £40k whatever way you cut the cake. If you both have state pensions you will achieve the £40k after tax based on that and the DBs alone from 68. 

Assuming your wife also takes income from the SIPPs then she will probably be taxed on the extra income if converting the lump sum to DB.

It probably comes down to your approach to risk and at what points of your retirement you plan to spend more (or pass on money to others).

If it was me. On balance, I would preserve the lump sum for the extra flexibility it gives. 

I really like the last paragraph I've quoted about, the whole reply is good like the others here.

Looks like I'm in a similar position to the OP.

A year ago I was paranoid with the LTA and 100% feeling poor value for me taking any TFLS out of my DB scheme as it may reduce the effectiveness I could possibly use my DC later on.

But, time has passed and LTA gone and my DB scheme upped TFLS commutation from X 22 to X 25 in my case due my age etc.

So now they have quoted me 31K PA or take 150K TFLS and pension then 25K PA at age 62.

Partner and me due full SP at 67 and partner has a very modest DC pension unfortunately.

My current view of taking the 150K cash anf place that properly in typical investments.

I feel from an overall point of view in my case, taking that 150K is the best option. 

I'll be interested reading all comments on this thread, sorry for drifting so much, but this thread appears pretty relevant to me.

Albermarle

the_k_dog said:

Hoenir said:

What's your long term plan for the money held in the SIPP's?   

Don't let tail wag the dog so to speak. 

We don't have one! With our lifestyle - and certainly my wife's cautious spending habits - we would probably never dip into it. Which is a bit daft, really, after all that "going without" for years. On the other hand, if we don't use it, we'll lose it / the state would get its hands on it (father in law currently spending £1k plus a week on care fees for the mother in law).

Not sure spending all your money and then having to go into a council funded care setting is really a very good plan. 
One of the advantages of having assets when older is so you can access better quality health and care provision. In any case most older people never end up in a care home, and for those that do it is usually only for a couple of years on average. It is only a very small minority where costs can escalate to Hundreds of Thousands of Pounds.

the_k_dog

Albermarle said:

the_k_dog said:

Hoenir said:

What's your long term plan for the money held in the SIPP's?   

Don't let tail wag the dog so to speak. 

We don't have one! With our lifestyle - and certainly my wife's cautious spending habits - we would probably never dip into it. Which is a bit daft, really, after all that "going without" for years. On the other hand, if we don't use it, we'll lose it / the state would get its hands on it (father in law currently spending £1k plus a week on care fees for the mother in law).

Not sure spending all your money and then having to go into a council funded care setting is really a very good plan. 
One of the advantages of having assets when older is so you can access better quality health and care provision. In any case most older people never end up in a care home, and for those that do it is usually only for a couple of years on average. It is only a very small minority where costs can escalate to Hundreds of Thousands of Pounds.

Sadly, my mum in law has been in a dementia care home for 5 years now, she has no idea where (or who) she is yet still physically strong. Father in law has released equity in their house to pay for her care. Who knows how life will pan out.  

Albermarle

the_k_dog said:

Albermarle said:

the_k_dog said:

Hoenir said:

What's your long term plan for the money held in the SIPP's?   

Don't let tail wag the dog so to speak. 

We don't have one! With our lifestyle - and certainly my wife's cautious spending habits - we would probably never dip into it. Which is a bit daft, really, after all that "going without" for years. On the other hand, if we don't use it, we'll lose it / the state would get its hands on it (father in law currently spending £1k plus a week on care fees for the mother in law).

Not sure spending all your money and then having to go into a council funded care setting is really a very good plan. 
One of the advantages of having assets when older is so you can access better quality health and care provision. In any case most older people never end up in a care home, and for those that do it is usually only for a couple of years on average. It is only a very small minority where costs can escalate to Hundreds of Thousands of Pounds.

Sadly, my mum in law has been in a dementia care home for 5 years now, she has no idea where (or who) she is yet still physically strong. Father in law has released equity in their house to pay for her care. Who knows how life will pan out.  

Unfortunately this is the typical small minority situation where it can get very costly.

Secret2ndAccount

The commutation rate is not bad. It would be very good if you were 67 - the odds would be against you ever paying back the lump sum in your lifetime. However, at 57, the odds are that you will pay back the lump sum, and then be left with a lower pension in later life. So, unless you have a particular use in mind for the lump sum, opt for the lifelong guaranteed pension. You have plenty of accessible funds if you need them.
And for heaven's sake, start spending some money. You've got about 500k more than you need.

MK62

the_k_dog said:

Is there any way to calculate which would be the best option for my wife? 

There isn't.......the future is unknown, so either option's relative outcome is also unknown. All you can do is base your decision on certain assumptions, which will may well be wrong anyway - based on average life expectancy, median projected future returns on a diversified 60:40 portfolio and current 30 year projected inflation.....it looks like the lump sum would be the favourite (but of course, those projections might well turn out to be wrong).

LHW99

MK62 said:

the_k_dog said:

Is there any way to calculate which would be the best option for my wife? 

There isn't.......the future is unknown, so either option's relative outcome is also unknown. All you can do is base your decision on certain assumptions, which will may well be wrong anyway - based on average life expectancy, median projected future returns on a diversified 60:40 portfolio and current 30 year projected inflation.....it looks like the lump sum would be the favourite (but of course, those projections might well turn out to be wrong).

Is it all or nothing? could she have say half the lump sum and an intermediate pension?

the_k_dog

LHW99 said:

MK62 said:

the_k_dog said:

Is there any way to calculate which would be the best option for my wife? 

There isn't.......the future is unknown, so either option's relative outcome is also unknown. All you can do is base your decision on certain assumptions, which will may well be wrong anyway - based on average life expectancy, median projected future returns on a diversified 60:40 portfolio and current 30 year projected inflation.....it looks like the lump sum would be the favourite (but of course, those projections might well turn out to be wrong).

Is it all or nothing? could she have say half the lump sum and an intermediate pension?

It's a sliding scale, so I guess we could hedge our bets and go half way!