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Pension to lump sum conversion rates?

Miiade
Posts: 69 Forumite

Hi
i am thinking of taking my DB next year and the conversion rate from pension to lump is around 21
Am I correct in thinking that if the pension money I am giving up is taxed at 20% then the actual conversion rate is 25? (21 x 1.2)
If the above is correct then it would take 25 years to get my money back if I didn’t take the lump sum (ignoring inflation)
Have I got this right or have I got the figures wrong
Thanks
i am thinking of taking my DB next year and the conversion rate from pension to lump is around 21
Am I correct in thinking that if the pension money I am giving up is taxed at 20% then the actual conversion rate is 25? (21 x 1.2)
If the above is correct then it would take 25 years to get my money back if I didn’t take the lump sum (ignoring inflation)
Have I got this right or have I got the figures wrong
Thanks
0
Comments
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Miiade said:Hi
i am thinking of taking my DB next year and the conversion rate from pension to lump is around 21
Am I correct in thinking that if the pension money I am giving up is taxed at 20% then the actual conversion rate is 25? (21 x 1.2)
If the above is correct then it would take 25 years to get my money back if I didn’t take the lump sum (ignoring inflation)
Have I got this right or have I got the figures wrong
Thanks
Which is definitely worth considering if you have a use for the money.
The inflation protection your pension has is a factor. Some are unlimited CPI (public sector) and others can be capped at a max of 2.5%.
And your lifespan as well, if you are taking this at 60 the pension might be in payment for 40+ years 🤞0 -
More like 26.25. For every £100 pension you get £80 in your pocket or £2100 as a lump sum. But don't forget that £100 will increase with (some form of) inflation automatically each year but the lump sum will only increase (or decrease) with whatever investment vehicle you choose so the comparison is not black and white.
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Thanks for the replies both.
Yes I have a use for the lump sum so will be taking the maximum allowed0 -
If relevant to you, check the impact of taking a lump sum on spouse's pension if you die first, etc.
Somehow, my DB scheme pays 50% of the pension amount assuming no lump had been taken, regardless of if you actually took a lump sum or not. Don't know if this is unique or common, but worth checking and taking into account.0 -
otherwayup said:If relevant to you, check the impact of taking a lump sum on spouse's pension if you die first, etc.
Somehow, my DB scheme pays 50% of the pension amount assuming no lump had been taken, regardless of if you actually took a lump sum or not. Don't know if this is unique or common, but worth checking and taking into account.1
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