EVR local government, what option to take and what to do with it?

gingapete

Hi all,

There is going to be EVR at my work (local government) and I'm thinking of leaving.

I am 58 and have been in the pension for 30 years.

I know i do not get any penalties, if i take EVR, and I'm contemplating (if i get to go) what's best to do with what is on offer, as i still have a mortgage to finish.

For example purposes, my EVR calculations are:

1) Higher annual pension (18k) + smaller retirement lump sum (15k) + severance (25k)
2) Lower annual pension (12k) + much larger retirement lump sum (85k) + severance (25k)

NB: Either of the above lump sum payments and severance will pay my mortgage off which had 3 more years to go on a fixed rate of 3%.

So do i

A ) Take the lower annual pension, larger retirement lump sum and severance and spread them across ISA's/savings? And earn interest off that and be able to maybe draw out when i need it, then pay off mortgage in a few years?

Or

B ) Take higher annual pension and smaller retirement lump sum + severance into ISA/savings, and pay off mortgage in a few years time?

Or one of the above and something else with regards lump sums for investing?

Cheers

Marcon

gingapete said:

Hi all,

There is going to be EVR at my work (local government) and I'm thinking of leaving.

I am 58 and have been in the pension for 30 years.

I know i do not get any penalties, if i take EVR, and I'm contemplating (if i get to go) what's best to do with what is on offer, as i still have a mortgage to finish.

For example purposes, my EVR calculations are:

1) Higher annual pension (18k) + smaller retirement lump sum (15k) + severance (25k)
2) Lower annual pension (12k) + much larger retirement lump sum (85k) + severance (25k)

NB: Either of the above lump sum payments and severance will pay my mortgage off which had 3 more years to go on a fixed rate of 3%.

So do i

A) Take the lower annual pension, larger retirement lump sum and severance and spread them across ISA's/savings? And earn interest off that and be able to maybe draw out when i need it, then pay off mortgage in a few years?

Or

Take higher annual pension and smaller retirement lump sum + severance into ISA/savings, and pay off mortgage in a few years time?

Or one of the above and something else with regards lump sums for investing?

Cheers

What are your objectives/attitude to risk?

collins74

For me and this is a completely unscientific, non data driven answer - I would take the higher pension.  You are young and when linked to CPI increases it will out weigh that extra lump sum you will get by doing the 1 to 12 commutation.  

You say that either of the lump sums will be enough to clear the mortgage so I would take the higher pension and pay it off. 

Each to their own of course and other people on these forums are better informed than me to give you a view.

gingapete

Marcon said:

gingapete said:

Hi all,

There is going to be EVR at my work (local government) and I'm thinking of leaving.

I am 58 and have been in the pension for 30 years.

I know i do not get any penalties, if i take EVR, and I'm contemplating (if i get to go) what's best to do with what is on offer, as i still have a mortgage to finish.

For example purposes, my EVR calculations are:

1) Higher annual pension (18k) + smaller retirement lump sum (15k) + severance (25k)
2) Lower annual pension (12k) + much larger retirement lump sum (85k) + severance (25k)

NB: Either of the above lump sum payments and severance will pay my mortgage off which had 3 more years to go on a fixed rate of 3%.

So do i

A) Take the lower annual pension, larger retirement lump sum and severance and spread them across ISA's/savings? And earn interest off that and be able to maybe draw out when i need it, then pay off mortgage in a few years?

Or

Take higher annual pension and smaller retirement lump sum + severance into ISA/savings, and pay off mortgage in a few years time?

Or one of the above and something else with regards lump sums for investing?

Cheers

What are your objectives/attitude to risk?

Probably to keep money going for as long as i can, but have options to use anything earned to add to my monthly income. I'm not sure about risk tbh, so would have to get information and go from there.

Marcon

gingapete said:

Marcon said:

gingapete said:

Hi all,

There is going to be EVR at my work (local government) and I'm thinking of leaving.

I am 58 and have been in the pension for 30 years.

I know i do not get any penalties, if i take EVR, and I'm contemplating (if i get to go) what's best to do with what is on offer, as i still have a mortgage to finish.

For example purposes, my EVR calculations are:

1) Higher annual pension (18k) + smaller retirement lump sum (15k) + severance (25k)
2) Lower annual pension (12k) + much larger retirement lump sum (85k) + severance (25k)

NB: Either of the above lump sum payments and severance will pay my mortgage off which had 3 more years to go on a fixed rate of 3%.

So do i

A) Take the lower annual pension, larger retirement lump sum and severance and spread them across ISA's/savings? And earn interest off that and be able to maybe draw out when i need it, then pay off mortgage in a few years?

Or

Take higher annual pension and smaller retirement lump sum + severance into ISA/savings, and pay off mortgage in a few years time?

Or one of the above and something else with regards lump sums for investing?

Cheers

What are your objectives/attitude to risk?

Probably to keep money going for as long as i can, but have options to use anything earned to add to my monthly income. I'm not sure about risk tbh, so would have to get information and go from there.

So ideal world scenario, like most of us! Sadly it's not quite that simple (never is with pensions and investments).

You don't say if you will be a basic rate taxpayer in retirement, but if the example figures you've given above are close to 'real' ones, it sounds as if that's the case. 

Maybe, as is so often the case, there's a halfway house, especially if you aren't used to investing hefty sums of cash. Maybe a pension of something more than £12K but less than £18K, with a commensurate adjustment in the cash lump sum? That way you get a higher than £1K monthly income from your pension, plus cash from the lump sum to invest as you choose. You'll also have cash from your severance payment. That's where risk comes into its own: you can either opt for safe and pretty secure, but likely to have a low rate of interest - think cash deposit account; or something (stocks and shares) which will almost certainly be more volatile, have a higher risk of loss, but also a higher risk of a better return.

You're some way off getting your state pension, but that's within sight. Have you checked how much you'll get/whether they are any incomplete years you could top up:https://www.gov.uk/check-state-pension

Beeblebr0x

When I retired from Royal Mail aged 58 after 37 year's service, I was told the vast majority of retirees took the larger lump sum, which I did. The money is now mine to do with as I wish. This isn't relevant to you but I'd just had a cancer diagnosis and obviously didn't know how things would pan out.

Nebulous2

It's an individual decision, and one that is largely a gamble on how long you will live, but also depends on how much risk you would take with the lump sum. 

What would be your target income to lead the lifestyle you want in retirement?

I had unusual circumstances for my LGPS, which meant I didn't have an automatic lump sum. I had been a wage slave for 40 years and there was a certain comfort to that monthly payment dropping in my bank account every month. So I didn't take a lump sum at all. As we've had a couple of chunky CPI rises since I retired I have no regrets at all. 

Once I reach state pension age I'll have enough guaranteed income from my LGPS and my state pension to live on, in fact it is likely that I will not need to spend it all. That feels quite secure. 

Kernowshep

I'd be firmly in the larger annual pension camp (and leave the mortgage as long as possible before paying it off).

Redundancy with non reduced index linked pension starting 10 years before SPA is the dream ticket - and will cost the pension fund an absolute fortune.

pterri

Kernowshep said:

I'd be firmly in the larger annual pension camp (and leave the mortgage as long as possible before paying it off).

Redundancy with non reduced index linked pension starting 10 years before SPA is the dream ticket - and will cost the pension fund an absolute fortune.

I know a couple of people who got that, they were cheesed of at redundancy but were less so when they saw the benefit. I’d bite their hand off 

gingapete

Marcon said:

gingapete said:

Marcon said:

gingapete said:

Hi all,

There is going to be EVR at my work (local government) and I'm thinking of leaving.

I am 58 and have been in the pension for 30 years.

I know i do not get any penalties, if i take EVR, and I'm contemplating (if i get to go) what's best to do with what is on offer, as i still have a mortgage to finish.

For example purposes, my EVR calculations are:

1) Higher annual pension (18k) + smaller retirement lump sum (15k) + severance (25k)
2) Lower annual pension (12k) + much larger retirement lump sum (85k) + severance (25k)

NB: Either of the above lump sum payments and severance will pay my mortgage off which had 3 more years to go on a fixed rate of 3%.

So do i

A) Take the lower annual pension, larger retirement lump sum and severance and spread them across ISA's/savings? And earn interest off that and be able to maybe draw out when i need it, then pay off mortgage in a few years?

Or

Take higher annual pension and smaller retirement lump sum + severance into ISA/savings, and pay off mortgage in a few years time?

Or one of the above and something else with regards lump sums for investing?

Cheers

What are your objectives/attitude to risk?

Probably to keep money going for as long as i can, but have options to use anything earned to add to my monthly income. I'm not sure about risk tbh, so would have to get information and go from there.

So ideal world scenario, like most of us! Sadly it's not quite that simple (never is with pensions and investments).

You don't say if you will be a basic rate taxpayer in retirement, but if the example figures you've given above are close to 'real' ones, it sounds as if that's the case. 

Maybe, as is so often the case, there's a halfway house, especially if you aren't used to investing hefty sums of cash. Maybe a pension of something more than £12K but less than £18K, with a commensurate adjustment in the cash lump sum? That way you get a higher than £1K monthly income from your pension, plus cash from the lump sum to invest as you choose. You'll also have cash from your severance payment. That's where risk comes into its own: you can either opt for safe and pretty secure, but likely to have a low rate of interest - think cash deposit account; or something (stocks and shares) which will almost certainly be more volatile, have a higher risk of loss, but also a higher risk of a better return.

You're some way off getting your state pension, but that's within sight. Have you checked how much you'll get/whether they are any incomplete years you could top up:https://www.gov.uk/check-state-pension

Hi @marcon, thank you for your reply.

Yes i am a basic tax payer, those examples are near too.

I have sent a request in to LGPS to ask how i can look at using the lump sum to improve my yearly amount, so i can see how that will benefit me more securely. I have also asked to go on a pre-retirement workshop, organised through work, this is in April, so not sure if that would be in time, i suppose it would, as things take longer than you think.

The severance itself, wont pay the mortgage off totally, but circumstances may change in the future on that.

I have checked my state pension and I'm up to the full amount that you can get, so that would be a bonus. 

(*) If i took the max lump sum and used that to boost my yearly pension, then that would take me to state pension age and i could probably live better on that, with reduced pension (less tax) and boosted monthly take out, when needed, from a high interest ISA/savings account?

It's like I should have looked into these things earlier, isn't it? That's me being sarcastic by the way, especially as I'm the bloody first one to tell my younger family members, to get your pension sorted and if you have a mortgage, pay any extra you have off monthly, mainly because i didn't do it myself until the last year or two

Thanks for your reply, its making me think more now, so any other updates would be appreciated especially on (*) above

gingapete

Kernowshep said:

I'd be firmly in the larger annual pension camp (and leave the mortgage as long as possible before paying it off).

Redundancy with non reduced index linked pension starting 10 years before SPA is the dream ticket - and will cost the pension fund an absolute fortune.

@Ke@Kernowshep thanks for replying

I have not a clue what this means "Redundancy with non reduced index linked pension starting 10 years before SPA is the dream ticket - and will cost the pension fund an absolute fortune." but if it means its good for me, then I'm up for that!! 🤣