Thoughts on PCLS or bigger payments??

MetaPhysical

I have no mortgage, I own my home outright,  and I'm sitting on about 50k in cash in Cash ISAs (yeah I know, I plan to move this to SnS ISA).  I am 58 not married (I'm a widower), although will be getting re-married in about two years.  I am retiring at the end of this year (Dec 2025).  I like nice things but do not have massive outgoings.  Two full SP at SPA.  Need to buy a car - 30-40k-ish upon retirement that will last me 5 years or so.

I have a DB scheme with my old employer that has offered me a myriad of options however there are two that I am considering.  All index linked.
1.Receive a Defined Benefits pension of £20,243.52 a year and a temporary pension of £3,581.04 a year until you reach state pension age.  No lump sum.

2. Receive a tax-free pension commencement lump sum of £123,384.40, (including all inrespect of your current Pensions Savings Plan Master Trust fund estimated to be £16,142.52) and a pension of £14,926.68 a year and a temporary pension of £3,581.04 a year until you reach state pension age.

(the other options are an in between of the above)

Now, I also have a DC fund of £700k and I am going to take 100k TFC from that and then use the remaining 168k for UFPLS on each withdrawal of ther remaining 600k

I also have a widower's pension of £9k per annum.  Id like a lifestyle of about 4.5-5k-ish per month net to pay for cruises and holidays, cars etc.  Some months less and others more but about that.

My gut instinct is to go with option 1 because I have no need of 223k in cash that I can't get into ISAs, i only need about 100k at this stage.  Also index-linked money, guaranteed, is not to be sniffed at!  Option 1 will pay me about 5200 a year more.  However, since I am going to creeping into 40% tax territory then 40% of that could go immediately in tax.  In that case it would leave me 3150.  Now, the lump sum option pays me 123384/3146 nearly 40 years of those payment!!!!  It will be a nice problem to have to be alive at 98 and worry about this.

I know it's quite a specific question but I'd appreciate your thoughts please?  I have not taken a penny from either the DC or DB pensions yet so this is a blank piece of paper.  Many thanks for reading my detailed question and a virtual beer for you!

Marcon

MetaPhysical said:

I have no mortgage, I own my home outright,  and I'm sitting on about 50k in cash in Cash ISAs (yeah I know, I plan to move this to SnS ISA).  I am 58 not married (I'm a widower), although will be getting re-married in about two years.  I am retiring at the end of this year (Dec 2025).  I like nice things but do not have massive outgoings.  Two full SP at SPA.  Need to buy a car - 30-40k-ish upon retirement that will last me 5 years or so.

I have a DB scheme with my old employer that has offered me a myriad of options however there are two that I am considering.  All index linked.
1.Receive a Defined Benefits pension of £20,243.52 a year and a temporary pension of £3,581.04 a year until you reach state pension age.  No lump sum.

2. Receive a tax-free pension commencement lump sum of £123,384.40, (including all inrespect of your current Pensions Savings Plan Master Trust fund estimated to be £16,142.52) and a pension of £14,926.68 a year and a temporary pension of £3,581.04 a year until you reach state pension age.

(the other options are an in between of the above)

Now, I also have a DC fund of £700k and I am going to take 100k TFC from that and then use the remaining 168k for UFPLS on each withdrawal of ther remaining 600k

I also have a widower's pension of £9k per annum.  Id like a lifestyle of about 4.5-5k-ish per month net to pay for cruises and holidays, cars etc.  Some months less and others more but about that.

My gut instinct is to go with option 1 because I have no need of 223k in cash that I can't get into ISAs, i only need about 100k at this stage.  Also index-linked money, guaranteed, is not to be sniffed at!  Option 1 will pay me about 5200 a year more.  However, since I am going to creeping into 40% tax territory then 40% of that could go immediately in tax.  In that case it would leave me 3150.  Now, the lump sum option pays me 123384/3146 nearly 40 years of those payment!!!!  It will be a nice problem to have to be alive at 98 and worry about this.

I know it's quite a specific question but I'd appreciate your thoughts please?  I have not taken a penny from either the DC or DB pensions yet so this is a blank piece of paper.  Many thanks for reading my detailed question and a virtual beer for you!

It's a specific question based on limited information, which limits the usefulness and relevance of any answers - in particular in relation to your proposed marriage in two years (wishing you every happiness).

Maybe now is the time for some proper (paid for) advice based on a full understanding of your circumstances, attitude to risk, situation when you do remarry...? There's a lot more to think about than how much cash to take from your DB scheme.

DRS1

I may have missed something but a £700k pot in a DC pension will not give £268k of TFLS will it?  Perhaps you hope it will grow by 50% before you finish drawing from it?

If it doesn't then I don't think you have a choice of taking the TFLS from the DB pension or the DC pension.  I think you could consider taking enough TFLS from the DB scheme to make up the gap between £268k and £175k (25% of £700k)

Triumph13

I would recommend checking the rules on spouse's pension very carefully, as there is every chance your spouse to be would only get one if you marry before starting the pension.

MetaPhysical

DRS1 said:

I may have missed something but a £700k pot in a DC pension will not give £268k of TFLS will it?  Perhaps you hope it will grow by 50% before you finish drawing from it?

If it doesn't then I don't think you have a choice of taking the TFLS from the DB pension or the DC pension.  I think you could consider taking enough TFLS from the DB scheme to make up the gap between £268k and £175k (25% of £700k)

No.  I can take 168k from the DC pot (700/4) and 100k from the DB scheme or any proportion thereof.

Triumph13 said:

I would recommend checking the rules on spouse's pension very carefully, as there is every chance your spouse to be would only get one if you marry before starting the pension.

Thank you for that thought, I will check that but that would be highly spurious.  People marry when in receipt of pensions all the time, surely.

Dazed_and_C0nfused

MetaPhysical said:

DRS1 said:

I may have missed something but a £700k pot in a DC pension will not give £268k of TFLS will it?  Perhaps you hope it will grow by 50% before you finish drawing from it?

If it doesn't then I don't think you have a choice of taking the TFLS from the DB pension or the DC pension.  I think you could consider taking enough TFLS from the DB scheme to make up the gap between £268k and £175k (25% of £700k)

No.  I can take 168k from the DC pot (700/4) and 100k from the DB scheme or any proportion thereof.

Triumph13 said:

I would recommend checking the rules on spouse's pension very carefully, as there is every chance your spouse to be would only get one if you marry before starting the pension.

Thank you for that thought, I will check that but that would be highly spurious.  People marry when in receipt of pensions all the time, surely.

No doubt true.  HMRC still make a form available for people to claim Married Couple's Allowance so even some very elderly people are presumably still getting married!

I think the point being made though is that marrying when in receipt of a pension doesn't always mean the new spouse will be entitled to a survivors pension.

Marcon

MetaPhysical said:

Triumph13 said:

I would recommend checking the rules on spouse's pension very carefully, as there is every chance your spouse to be would only get one if you marry before starting the pension.

Thank you for that thought, I will check that but that would be highly spurious.  People marry when in receipt of pensions all the time, surely.

They do, but it doesn't automatically mean their new spouse qualifies for a survivor's pension from the scheme. Some schemes have rules which stipulate that a pension is only payable to a spouse if the marriage (or civil partnership) took place while the member was actively building up benefits in the scheme. Pensions in respect of death bed marriages (one where death takes place within say 6 months of the marriage) are often excluded, or only payable at the discretion of the trustees.

MetaPhysical

Thank you @Marcon, I see the point.  Well, hopefully, god willing, it won't be a deathbed marriage.  If it's the former then there isn't anything I can do because we can't get married at the moment due to us both owning our own properties and then the nightmare of which is the "main residence" for capital gains.  I am trying to sell mine first to move in with her and then marry.  Been on the market for six months and the property market is dead.

DRS1

MetaPhysical said:

DRS1 said:

I may have missed something but a £700k pot in a DC pension will not give £268k of TFLS will it?  Perhaps you hope it will grow by 50% before you finish drawing from it?

If it doesn't then I don't think you have a choice of taking the TFLS from the DB pension or the DC pension.  I think you could consider taking enough TFLS from the DB scheme to make up the gap between £268k and £175k (25% of £700k)

No.  I can take 168k from the DC pot (700/4) and 100k from the DB scheme or any proportion thereof.

OK but that wasn't what you said in your first post
"Now, I also have a DC fund of £700k and I am going to take 100k TFC from that and then use the remaining 168k for UFPLS on each withdrawal of ther remaining 600k"

Marcon

MetaPhysical said:

Thank you @Marcon, I see the point.  Well, hopefully, god willing, it won't be a deathbed marriage.  If it's the former then there isn't anything I can do because we can't get married at the moment due to us both owning our own properties and then the nightmare of which is the "main residence" for capital gains.  I am trying to sell mine first to move in with her and then marry.  Been on the market for six months and the property market is dead.

How very frustrating for you both.

I feel a bit of a heel raising this point, but ... what happens to your widower's pension on remarriage (or cohabitation)? In some schemes it will cease, albeit with caveats (eg a spouse's pension from Teachers Pensions will cease on remarriage if the member had no pensionable service under the TPS on or after 1 January 2007). Hopefully this comment is a complete red herring - ditto my earlier points - but picking up issues like this gives you time to plan if they do impact on you.

MetaPhysical

Marcon said:

MetaPhysical said:

Thank you @Marcon, I see the point.  Well, hopefully, god willing, it won't be a deathbed marriage.  If it's the former then there isn't anything I can do because we can't get married at the moment due to us both owning our own properties and then the nightmare of which is the "main residence" for capital gains.  I am trying to sell mine first to move in with her and then marry.  Been on the market for six months and the property market is dead.

How very frustrating for you both.

I feel a bit of a heel raising this point, but ... what happens to your widower's pension on remarriage (or cohabitation)? In some schemes it will cease, albeit with caveats (eg a spouse's pension from Teachers Pensions will cease on remarriage if the member had no pensionable service under the TPS on or after 1 January 2007). Hopefully this comment is a complete red herring - ditto my earlier points - but picking up issues like this gives you time to plan if they do impact on you.

Thankyou Marcon. Fortunately my late wife worked past that date and was still a teacher in service when she died in 2013 so I get to keep the pension. Despite my funds I feel I am entitled to this pension as well given the huge contributions my late wife made to the scheme over her 30 years as a teacher. 

i have checked my DB pension scheme and there is no mention of needing to be married to the spouse upon commencement of the pension.