To commute or not commute - that is the question!

juneanne

I have the choice of a widows army pension of just over £203 per month for life (will be subject to inflation increases) or a taxable lump sum of just under £28,000 (which equates to approx 9 years of the monthly payment). I will be 77 this year. Although my monthly income is now less than it was I am financially secure so a lump sum is not urgently needed. Should I (a) take the lump sum and invest it or (b) place lump sum in an account and pay my current account £203 per month or (c) take the £203 monthly pension. Also will lump sum be subject to 20% income tax?

Alice_Holt

I'd say there isn't a clear cut answer, it is entirely dependent on your current circumstances and financial situation.

If you are financially secure and in good health, I'd suggest a fourth option - take some of the lump sum and spend it on enhancing your life / travel / experiences over the next 2 / 3 years. Regard it as a pot to use for doing what you otherwise might not have been able to, or to make your life more comfortable.

Re tax - talk to the pension administrators, but if taxable it's likely to be taxed at your marginal tax rate - so you may wish to take it in tranches over a couple of tax years to avoid paying an element of higher rate income tax on it (if tax will be an issue for you, and should it be possible to do this). 





Btw I've asked the mods to move your thread to a more appropriate board - possibly pensions or savings, rather than the benefits board. 

juneanne

Thank you so much for your advice and spotting that my question should be moved to a more appropriate place (I diidn't realise it was on the benefits board!).

peteuk

Double check the tax o the lump sum.  as depending on where you look you get two different answers.
I would call Equinit who manage HMF pensions and hopefully they will be ale to give you the info. 

juneanne

Thanks for that, and I am going to call them tomorrow as when I asked them if it was 20% they said 'thereabouts'. I need something a bit more accurate than that.

peteuk

juneanne said:

Thanks for that, and I am going to call them tomorrow as when I asked them if it was 20% they said 'thereabouts'. I need something a bit more accurate than that.

If income tax is payable on it then depending on your tax code and income, will depend on what level of tax is applied. This is taken from the government website. 

Band	Taxable income	Tax rate
Personal Allowance	Up to £12,570	0%
Basic rate	£12,571 to £50,270	20%
Higher rate	£50,271 to £125,140	40%
Additional rate	over £125,140	45%

sheramber

juneanne said:

Thanks for that, and I am going to call them tomorrow as when I asked them if it was 20% they said 'thereabouts'. I need something a bit more accurate than that.

What rate of tax is charged will depoend on what other incoime you have,

The taxabke sium will be added to your other income and the total charged to tax as shown by peteuk.