civil service pension

erajo76

hi, I have left civil service many years ago and now at 60, they offer 60k lumpsum with 9k annual pension or 34k lumpsum with 11k annual pension...I think I would be better off taking the 60k with reduced pension, but what do you think? tia

sammyjammy

Do you need the lumpsum?  Unless you have life limiting issues its usually better to take the higher pension, the commutation rate for civil service is very poor at 12:1

Marcon

erajo76 said:

hi, I have left civil service many years ago and now at 60, they offer 60k lumpsum with 9k annual pension or 34k lumpsum with 11k annual pension...I think I would be better off taking the 60k with reduced pension, but what do you think? tia

What's your definition of 'better off'?

Impossible to guess. There are lots of other threads on this forum about the merits of tax free cash v larger pension, so have a browse and that should help. The search box (magnifying glass icon) is on the right of the dark green bar above.

QrizB

erajo76 said:

I think I would be better off taking the 60k with reduced pension, but what do you think?

You'd be giving up an amount of pension that would cost £50k to buy as an annuity, in exchange for £26k.

That's like selling £10 notes for £5 each.

erajo76 said:

hi, I have left civil service many years ago

What have you been doing since leaving the Civil Service? Do you have other pensions? Have you accrued a full State Pension?

MikeyPGT

Do you have any other income?  The £11k would take you close to your tax limit and anything above £12570 will be liable for tax.  The lump sum will be tax free ...

TheSpectator

MikeyPGT said:

Do you have any other income?  The £11k would take you close to your tax limit and anything above £12570 will be liable for tax.  The lump sum will be tax free ...

But need to also consider the pension will increase by CPI each year.

ali_bear

Commutation factor of 12 becomes effectively 15 when all of the income would be taxed at 20%, and 20 when all of it would be taxed at 40%. But not many would achieve that, and most would live for longer than 20 years. 

Take the pension income. 

erajo76

QrizB said:

erajo76 said:

I think I would be better off taking the 60k with reduced pension, but what do you think?

You'd be giving up an amount of pension that would cost £50k to buy as an annuity, in exchange for £26k.

That's like selling £10 notes for £5 each.

erajo76 said:

hi, I have left civil service many years ago

What have you been doing since leaving the Civil Service? Do you have other pensions? Have you accrued a full State Pension?

im still working part time and will have full state pension

TheSpectator

Also worth mentioning it's not an all or nothing situation - you can take a lump sum anywhere between the standard and max and give up a lesser amount of pension.