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how do you calculate lump sum
MRSTITTLEMOUSE
Posts: 8,547 Forumite
My husband retires soon,we have his pension details and a calculation of his pension.What we don't have is a calculation of what his lump sum payment would be if he were to take one.He has a final salary pension that has run for 38 years.Anyone know how we could calculate this ourselves.
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Comments
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The calculation method will be shown in your pension scheme booklet. Make sure its the most recent version though as the rules changed in April 2006.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0
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The default formula for a final salary scheme post A day is somewhat more complicated as bizarrely you have to know how much cash you are taking in order to calculate how much cash you can take...!
It is possible however if you know what the pension is prior to taking cash and what the commutation factor is (this is the amount of cash you get for every £1 of pension you give up)
However as Dunston says check the scheme rules as your scheme may be using different rules to the default.
Also does the scheme have and DC/ Money Purchase amounts in it (e.g AVCs) as this further complicates the equation.
JonathonI have worked for 5 years as a Pension Administrator and then a further year in a non-administrator pension role. I am not (and never have been) an adviser. Do not take anything I say as advice, it is information given on the best of my knowledge.0
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