When to draw pension

cfw1994

Columbus27 said:

Well I doubt I will live to 100!

if I take the larger monthly payment now I will just pay more tax though. At least the lump sum can be invested. That’s my thinking anyway. 

Plus I can pay off my remaining mortgage now. 

As this shows, there are always options and trade-offs.   Taking a bigger TFLS might make sense for you - there are always decisions to be made!

In your case, I would suggest you model some “spreadsheet” sums to figure out the difference 🤷‍♂️

As mentioned above, that is a pretty terrible “commutation” rate (the ratio of the benefit you get versus what you are giving up longer term).
if you are in reasonable health, it isn’t unreasonable to expect to get to 85 or beyond

Triumph13

You can avoid paying extra tax now by just upping your current pension contributions.

The key question is what does your long term position look like?  If the reduced LGPS + your state pension will give you more than enough income in retirement, then it doesn't matter so much that the commutation is a lousy deal.  If it's going to be tight, then you need to do some careful modelling to find the optimum solution.

Columbus27

I get what you mean. I could get £300 more per month with the lower TFLM and over 20 years that £300 adds up to a lot more than the higher lump sum. 

cfw1994

Precisely 👍

Brie

Will taking the pension while you are working full time take you into a higher tax bracket?  (don't forget to consider overtime, bonuses and other taxable benefits)  If so I'd suggest you wait until you go part time.

Sarahspangles

if you contributed to an LGPS pension prior to 30 September 2006 you may have Rule of 85 entitlement, which allows you to take some pension unreduced from 60. Do you have access to Deferred Benefit statements, or better still ‘MyPension’?

LGPS do not offer a good commutation rate for lump sums, you’d need to work out whether it’s worth taking a hit to clear a mortgage if you can simply pay it off over the remaining term.

Columbus27

I’m in higher tax bracket already. 

dunstonh

If it's from LGPS that tends to be awful from a longer term financial view.

The OP mentioned there are debts.   Clearing expensive debt can make it viable to take an increased lump sum.  And if the OP has no savings of any sort, then the pension can be the last chance to get some, which they will need in later life for pay for things like cars, boiler replacements etc.   Sometimes, the best option financially is not the best option when the wider scenario is known.

However, it may be a case that the adviser wasn't giving advice but was in conversation with someone where the discussion was generic and no details were obtained.    For example, the first post in this thread indicated it was likely a DC scheme.  So, comments made may well have been on that basis.  Later posts indicated it was LGPS. 

LHW99

Columbus27 said:

I’m in higher tax bracket already. 

Then putting the monthly LGPS payments into eg a SIPP or personal pension would (effectively) take that amount off your tax bill. You'd get standard rate tax reclaimed by the provider, and then fill in a form at HMRC to tell them about the amount you are putting in, to get your personal allowance raised so you pay less higher rate tax.

Just make sure that those contributions plus your employee / employer contributions at work aren't more than £60k

Columbus27

Why £60k significant?