Struggling to find the best pension income strategy

Qyburn

Ever_Hopeful said:

Does accessing the PCLS make any sense ?

Do you need a cash lump sum? If not then it doesn't sound a good deal, giving up an index-linked £5k per year in order to receive £88k.

saucer

Qyburn said:

Ever_Hopeful said:

Does accessing the PCLS make any sense ?

Do you need a cash lump sum? If not then it doesn't sound a good deal, giving up an index-linked £5k per year in order to receive £88k.

Although that’s a commutation factor of 17.6 which is better than some e.g most public sector which are only 12.

MK62

You also have to factor in that the 88k is tax free, whereas the alternative extra income is not.......which makes the commutation factor more like 23:1........so it's probably something of a 50:50 coin toss as to which is the better option - nobody really knows though.

FIREDreamer

saucer said:

Qyburn said:

Ever_Hopeful said:

Does accessing the PCLS make any sense ?

Do you need a cash lump sum? If not then it doesn't sound a good deal, giving up an index-linked £5k per year in order to receive £88k.

Although that’s a commutation factor of 17.6 which is better than some e.g most public sector which are only 12.

MK62 said:

You also have to factor in that the 88k is tax free, whereas the alternative extra income is not.......which makes the commutation factor more like 23:1........so it's probably something of a 50:50 coin toss as to which is the better option - nobody really knows though.

17.6 / 0.8 = 22.0 for a basic rate taxpayer

17.6 / 0.6 = 29.33 if that bit of income was taxable at 40%

Expotter

FIREDreamer said:

saucer said:

Qyburn said:

Ever_Hopeful said:

Does accessing the PCLS make any sense ?

Do you need a cash lump sum? If not then it doesn't sound a good deal, giving up an index-linked £5k per year in order to receive £88k.

Although that’s a commutation factor of 17.6 which is better than some e.g most public sector which are only 12.

MK62 said:

You also have to factor in that the 88k is tax free, whereas the alternative extra income is not.......which makes the commutation factor more like 23:1........so it's probably something of a 50:50 coin toss as to which is the better option - nobody really knows though.

17.6 / 0.8 = 22.0 for a basic rate taxpayer

17.6 / 0.6 = 29.33 if that bit of income was taxable at 40%

Another factor to take into account, is that since the surviving spouse's pension is the same regardless of whether you take the lump sum or not, if you happen to die before your wife, the lump sum is money in the bank that she'd inherit without any tax liability, otherwise it'd be lost in a manner of speaking (depending, of course, on how long you live). Could be an important consideration given that she doesn't have her own pension provisions other than SP.

Ever_Hopeful

Expotter said:

FIREDreamer said:

saucer said:

Qyburn said:

Ever_Hopeful said:

Does accessing the PCLS make any sense ?

Do you need a cash lump sum? If not then it doesn't sound a good deal, giving up an index-linked £5k per year in order to receive £88k.

Although that’s a commutation factor of 17.6 which is better than some e.g most public sector which are only 12.

MK62 said:

You also have to factor in that the 88k is tax free, whereas the alternative extra income is not.......which makes the commutation factor more like 23:1........so it's probably something of a 50:50 coin toss as to which is the better option - nobody really knows though.

17.6 / 0.8 = 22.0 for a basic rate taxpayer

17.6 / 0.6 = 29.33 if that bit of income was taxable at 40%

Another factor to take into account, is that since the surviving spouse's pension is the same regardless of whether you take the lump sum or not, if you happen to die before your wife, the lump sum is money in the bank that she'd inherit without any tax liability, otherwise it'd be lost in a manner of speaking (depending, of course, on how long you live). Could be an important consideration given that she doesn't have her own pension provisions other than SP.

Thanks for pointing that out.  Hadn't considered that aspect previously.

MK62

FIREDreamer said:

saucer said:

Qyburn said:

Ever_Hopeful said:

Does accessing the PCLS make any sense ?

Do you need a cash lump sum? If not then it doesn't sound a good deal, giving up an index-linked £5k per year in order to receive £88k.

Although that’s a commutation factor of 17.6 which is better than some e.g most public sector which are only 12.

MK62 said:

You also have to factor in that the 88k is tax free, whereas the alternative extra income is not.......which makes the commutation factor more like 23:1........so it's probably something of a 50:50 coin toss as to which is the better option - nobody really knows though.

17.6 / 0.8 = 22.0 for a basic rate taxpayer

17.6 / 0.6 = 29.33 if that bit of income was taxable at 40%

Using the OP's figures from the first post, the commutation factor is actually around 18.33 rather than 17.6.....given that the extra income from not taking the £88k PCLS is £4800pa (18.1k - 13.3k), rather than £5000, and 18.33/0.8=22.92.......but it's a moot point.....it's still a c.50:50 call either way......