Taking very small lump sum from pension by Rothsey

mypension

I started a very small pension when at work on top of my works pension and state pension which I am claiming now.  I am 76 and Rothsey have offered me a small lump sum instead of receiving the smallest pension which amounts to £67 a month. The lump sum is about 10 years of pension pay out.  Should I take this or carry on with the pension.  The pension ends with my demise.

dunstonh

You haven't mentioned whether you need the income or the lump sum (as continuing with the pension is a third option)

Marcon

mypension said:

I started a very small pension when at work on top of my works pension and state pension which I am claiming now.  I am 76 and Rothsey have offered me a small lump sum instead of receiving the smallest pension which amounts to £67 a month. The lump sum is about 10 years of pension pay out.  Should I take this or carry on with the pension.  The pension ends with my demise.

How would it impact on your tax position? What would you do with the lump sum if you took that? Does the pension increase in payment, or is it fixed? What's longevity like in your family (ie do you confidently expect to live for at least 10 years or more)?

In short, impossible to answer, I'm afraid, based on close to zero relevant information.

mypension

I would be taxed £1690 on a lump sum of £8398. We have not had any holidays for the last two years and I am disabled.  So would like to have one good holiday in this country and put the rest in an ISA?? My family typically live to about 84. Do  insurance companies do this to wriggle out of paying for years??

Marcon

mypension said:

I would be taxed £1690 on a lump sum of £8398. We have not had any holidays for the last two years and I am disabled.  So would like to have one good holiday in this country and put the rest in an ISA?? My family typically live to about 84. Do  insurance companies do this to wriggle out of paying for years??

Insurance companies do this to give people a choice, which is what they're doing here - and giving you the chance to take a good holiday (which sounds to me a pretty good use of a lump sum, if that's what you decide to do!).

sandsy

They do it because it reduces the administration of paying pensions for years to come which, in turn, reduces their costs. The offer they make will be based on average life expectancy so will disadvantage those who live longer than average. The ONS life expectancy calculator for a 76 year old suggests average life expectancy of 86 for a man and 89 for a woman:

https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthandlifeexpectancies/articles/lifeexpectancycalculator/2019-06-07

The calculator also shows the chances of living longer than average.

A cynic might say they also do it because they know many people place a higher value on money today than an ongoing income stream, even when the latter may be in their best interests.

singhini

mypension said:

I started a very small pension when at work on top of my works pension and state pension which I am claiming now.  I am 76 and Rothsey have offered me a small lump sum instead of receiving the smallest pension which amounts to £67 a month. The lump sum is about 10 years of pension pay out.  Should I take this or carry on with the pension.  The pension ends with my demise.

Is this their first and final offer?
How about you going back to them with a counter offer i.e. you want 12 years worth of money or even 14 years worth of money ect...

I recall many years ago when pensions matured you would be offered an annuity and that was often a negotiation process i.e. you say no to their first offer and they would come back with a counter offer.

Might be worth a try. 

badmemory

As long as it is not going to affect the rate at which you pay tax or any benefits you may receive.   I took my small private one at 74.  And payback time was also 10 years.

xylophone

You don't want the pension of £67 a month?

You are aged 76,  disabled and unlikely to become more able in the future?

You would really enjoy a holiday while you are well enough to enjoy it and to have a sum in savings?

It will not affect the payment of any benefits for which you are eligible?

I can see why somebody in your position would give careful consideration to taking the small pension as a lump sum.

https://www.litrg.org.uk/pensions/pension-withdrawals/small-pensions

Dazed_and_C0nfused

mypension said:

I would be taxed £1690 on a lump sum of £8398. We have not had any holidays for the last two years and I am disabled.  So would like to have one good holiday in this country and put the rest in an ISA?? My family typically live to about 84. Do  insurance companies do this to wriggle out of paying for years??

I'm not sure I would quite put it like that, they are giving you an option but ultimately it's you who who is deciding whether to accept that option or not.

If you don't want them to "wriggle out of paying" then you can simply say no thanks, let's carry on as we are and keep getting your small pension each month.