"Cashing in" a defined benefit pension

DRS1

Keep_pedalling said:

The normal pension age for the scheme is also likely to be 60 so you need to see how much your annual payments are being reduced by to take it early as that may also not be a good deal.

Or possibly 65 (so taking it 10 years early which would mean quite a big reduction)

OP Early retirement factors are not usually spelt out in your scheme booklet or even the rules so you will need to ask the administrator.  They do change from time to time so also worth asking if a change is coming (and what it will be if it is imminent and known).

QrizB

If you were to "cash it in" (and I also think this would be a crazy thing to do) you wouldn't get £50k as you'd have to pay income tax on 3/4 of it. Depending on your tax situation you might get £40k or less.

Aretnap

bjorn_toby_wilde said:

You’re giving up £900 a year for a lump sum of £11000.

£11,000 divided by 900 is approximately 12 and that’s the commutation factor - 12:1

That’s a poor commutation factor.  If it was around 20:1 or more you might think it was more worth taking.

It's an atrocious commutation factor. A 55 year old man can expect to live another 29 years on average, so can expect to receive £26000 from that £900 pa income - more if you account for the fact that the pension will presumably increase in line with inflation.

Giving up £26000 for £11000 is not a good deal, whatever rate of tax you pay on the pension income and whatever value you place in getting money now rather than in the future.