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Taking pension early?

Hi everyone, I have a university pension which I no longer pay into since leaving in 2018. A friend told me that the factors were dropping on 1st October 2024 so that scheme members would get several % less after this time. I asked for a statement for taking my deferred benefits before these changes happen. Basically I was offered 3 options - a small annual pension £6k and a max tax free lump sum, a middle range £7k pension and middling lump sum or an 8k pension and no lump sum. I plan to continue working full time for the foreseeable future but I  am not a high earner £24k single income household.
It looks as though if I left the pension be until NPA in 9 years time it would be worth maybe £3k annually more than these figures I've received. I am finding it hard to decide whether to leave it for now or take it, and if I take it whether to go for the max lump sum or the max annual pension or in the middle? 
I also wondered what the wisest thing to do with any tax free lump sum would be? Pay off my mortgage? Stocks and shares ISA? Invest to try to grow more money elsewhere? Home improvements? This is my main pension the other is an NHS one I get at age 60 which is smaller. 
I have been struggling to decide  what to do for the best so any advice would be really appreciated thank you.

Comments

  • El_Torro
    El_Torro Posts: 1,715 Forumite
    Tenth Anniversary 1,000 Posts Name Dropper
    Waiting until state pension age and getting £11k a year (in today’s money) doesn’t sound like a bad option to me, especially if you don’t know what to do with a tax free lump sum. 
  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 16,281 Forumite
    10,000 Posts Fifth Anniversary Name Dropper
    edited 6 October 2024 pm31 10:42PM
    You haven't told us what the exchange rate is for the extra lump sum but unless it's a particularly generous one then taking the most pension you can and no lump sum is potentially the best option in the long term.

    Especially if this is going to be your main pension after the State Pension.

    £11k from this pension plus £11.5k State Pension (today's standard new State Pension rate) gives you a solid foundation of guaranteed income for retirement, not far short of your current earnings.

    Add in your NHS pension and you could actually have more pension income than you have been earning.
  • Ace135
    Ace135 Posts: 10 Forumite
    Third Anniversary First Post
    Hi I think the commutation factor is 19.2 for pension to lump sum and 24.5 lump sum into pension. Thanks for any advice it's appreciated 👍
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