Pension commutation.

Dunnsdale

Received a letter this morning offering to commute a small gross annual pension of £1239.72 for a one off lump sum of £15,629.00.I'm 68 and currently in decent health.Any input or advice would be most welcome. 

xylophone

Is this pension already in payment or is it just that you have reached Scheme Pension Age and are being offered "trivial commutation"?

https://www.litrg.org.uk/tax-guides/pensioners/how-do-i-cash-my-small-pension

ewaste

What level of Index Linking does the annual pension income have? if your income needs are otherwise covered do you have a use for a lump-sum. 

Dunnsdale

Thank you for your prompt response. Already in payment. 

Dunnsdale

ewaste said:

What level of Index Linking does the annual pension income have? if your income needs are otherwise covered do you have a use for a lump-sum. 

Not sure it has any index linking(Coats UK Pension Scheme) ,given its not increased over the last couple of years.My income needs are pretty much covered. If I took the lump sum I would probably buy physical gold. 

xylophone

Check that you are eligible to take this option. 

The value is over £10,000 so not a "small pot" - are you affected by the £30,000 rule?

See link in previous and https://forums.moneysavingexpert.com/discussion/comment/78266120/#Comment_78266120



 If eligible and you choose commutation, remember that as the pension is in payment, the whole sum is taxable as income in the year of receipt.

The Administrator will deduct tax at basic rate but this may or may not be  the correct amount of tax in your circumstances.

jamesd

Hmm, income is 7.9% of the lump sum. State pension deferral adds 5.8% per year of deferral and this gets uncapped inflation increases.

Dunnsdale

 I think I'll leave things alone and carry on taking the monthly pension. The unsolicited lump sum offer only arrived yesterday and took me by surprise. Many thanks for the advice, much appreciated.