Defined Benefit Pension - Tax free lump sum or larger pension?

katejo

I had an annual meeting with a financial advisor this week. I said that I was inclined to slightly reduce my lump sum in favour of increased pension income for the various reasons given here. He took me by surprise when he suggested possibly having a larger lump sum and using some of it to purchase an annuity. The amount paid out to me would be related to my health at time of purchase (which my pension won't). I thought that annuities were only for DC pensions. 

MeteredOut

katejo said:

I had an annual meeting with a financial advisor this week. I said that I was inclined to slightly reduce my lump sum in favour of increased pension income for the various reasons given here. He took me by surprise when he suggested possibly having a larger lump sum and using some of it to purchase an annuity. The amount paid out to me would be related to my health at time of purchase (which my pension won't). I thought that annuities were only for DC pensions. 

Annuities don't have to be funded from a DC pension. You could even buy one with savings. Search for Purchased Life Annuity.

MarlowMallard

katejo said:

Triumph13 said:

If you are the type of people who are 'careful' with their money, you may find it easier to give yourselves permission to spend the regular income than the lump sum.  A lump sum that just sits there is a waste.

I am exactly like that. I will spend some of lump sum but won't feel comfortable about doing so! 

In my case it's the opposite, I feel guilty about blowing hard-earned "lifetime savings", but am quite happy to blow the lump sum "windfall".  So I took the max lump sum with the firm intention of spaffing it all on fun stuff before age 75, then winding down to potter around with less spending, and keeping the savings as a rainy-day fund.  

FIREDreamer

MarlowMallard said:

katejo said:

Triumph13 said:

If you are the type of people who are 'careful' with their money, you may find it easier to give yourselves permission to spend the regular income than the lump sum.  A lump sum that just sits there is a waste.

I am exactly like that. I will spend some of lump sum but won't feel comfortable about doing so! 

In my case it's the opposite, I feel guilty about blowing hard-earned "lifetime savings", but am quite happy to blow the lump sum "windfall".  So I took the max lump sum with the firm intention of spaffing it all on fun stuff before age 75, then winding down to potter around with less spending, and keeping the savings as a rainy-day fund.  

Wish I could have done thst instead of being boring and saving it when I have enough savings already.

I did upgrade to a newer car but my PCLS with interest / gains is larger now than when i took it even after buying a car with some of it.

katejo

MarlowMallard said:

katejo said:

Triumph13 said:

If you are the type of people who are 'careful' with their money, you may find it easier to give yourselves permission to spend the regular income than the lump sum.  A lump sum that just sits there is a waste.

I am exactly like that. I will spend some of lump sum but won't feel comfortable about doing so! 

In my case it's the opposite, I feel guilty about blowing hard-earned "lifetime savings", but am quite happy to blow the lump sum "windfall".  So I took the max lump sum with the firm intention of spaffing it all on fun stuff before age 75, then winding down to potter around with less spending, and keeping the savings as a rainy-day fund.  

I am trying to persuade myself to do this. I won't go for a larger lump sum though.