We're aware that some users are experiencing technical issues which the team are working to resolve. See the Community Noticeboard for more info. Thank you for your patience.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Civil Service Pension legacy lump sum to max out or not

Options
2»

Comments

  • MarlowMallard
    MarlowMallard Posts: 35 Forumite
    10 Posts Name Dropper

    Thank you neither (a) to any significant extent or (b) realistically apply for my circumstances.  Wondering why there would be different ratios? Is that just a difference of different pension schemes? Is your scheme not a civil service pension scheme? Sorry I feel such a dimwit with all of this.
    No , my scheme is not civil service. The accrual rate (pension/salary) per year is a lot worse than CS, but it looks like the lump sum deal is better.  I think roughly you can ignore the "indexation/inflation", since you could invest the lump sum to grow with ISAs, or if you didn't take the lump sum and pulled money out of existing ISA's you'd lose the growth on those instead.  Or, you can reduce spending in your 60s in order to be better off after 75, which doesn't appeal to me. 

    As others have noted, if you have 2 state pensions so £25k per year kicking in at 67, it's very tempting to just take the lump sum and spend most of it between 60-67, because unless the lump sum is huge you'll still have more income after 67 than before.    
  • atalantalass
    atalantalass Posts: 12 Forumite
    10 Posts Photogenic
    edited 26 May at 5:30PM
    Wondering how easy it will be to borrow money for bigger expenditure after retirement. Kitchen or bathroom upgrades, that sort of thing, and whether I need to factor that in to thinking on how much of a lump sum to take.
  • Wobble101
    Wobble101 Posts: 71 Forumite
    Fourth Anniversary 10 Posts Name Dropper
    edited 27 May at 10:59AM
    This is a helpful thread as I’m also considering this situation. 

    The other factor that gets mentioned is inheritance. If I die my spouse gets some benefit from my DB scheme (eg a reduced spousal pension) but not the “whole sum”; my (adult) son gets nothing. Consequently I’ve heard people argue for maxing out the lump sum as a way of having assets that can then form part of your estate. Again the challenge is that none of us know the future - you could do this, spend it all and/or your investments do poorly and at age 85 you’re significantly worse off that you would have been had you not taken that tempting lump sum. Or you might drop dead in 5 years and it will have proved a great decision. 
    In my case I’m leaning towards not taking it - my son will benefit from our home once we’ve both gone and I’d rather the security of knowing I’ve got enough to live on every year.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 350.9K Banking & Borrowing
  • 253.1K Reduce Debt & Boost Income
  • 453.5K Spending & Discounts
  • 243.9K Work, Benefits & Business
  • 598.8K Mortgages, Homes & Bills
  • 176.9K Life & Family
  • 257.2K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.