Any Pension experts here ?

dave28

dave28

dave28

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Please remove this thread if it is not ok to post this on the forum.

My old man is just about to retire and has been sent 3 options and he is finding it confusing.

I know this is a vague sheet of paper but obviously i cannot put too many details in public view for security reasons.

If there are any pension experts here that could advise the pros and cons of the options please.

I assume these annual pension figures are including state pension and the lump sum figures are tax free ?

Option 3 is confusing, is there are advantage to using that option.

His health is not that great since he has been a smoker for well over 5 decades so i am thinking option 2 is best maybe.

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That's a government pension, defined benefit I believe. I had a similar form with my DB (non gov) company pension. Pretty sure state pension would be on top of those figures. If his health isn't great then I'd go option 2. Option 3 would be if he, for example, wanted 10k, or 12k etc etc as a lump sum then the annual pension amount would be adjusted accordingly.
Can he not get any advice in house with this?
 
Option 3 is allowing you to take any value of lump sum upto 25% of your pension fund value tax free, leaving the rest available for an annuity.

Option 2 is the 25% lump sum value, and option 1 looks to be approx 8% lump sum. Personally, I would always take the maximum tax free lump sum, but that's just my personal choice, you could then re-invest this or spend as you wish.

The consideraton is, how much of a lifestyle does the £13k option give over the £9k option, bearing in mind I would assume he gets the full state pension on top of this as well? Personally I would rather front load my retirement lifestyle as I'm likely to be able to be able to enjoy higher expenditure when I'm 70 over when I'm 90 through holidays and higher luxury spending.
 
Uther said:
That's a government pension, defined benefit I believe. I had a similar form with my DB (non gov) company pension. Pretty sure state pension would be on top of those figures. If his health isn't great then I'd go option 2. Option 3 would be if he, for example, wanted 10k, or 12k etc etc as a lump sum then the annual pension amount would be adjusted accordingly.
Can he not get any advice in house with this?
Click to expand...

He has phoned them a couple of times and the info seems to go right over his head every time.

My first thought is option 2 is best for him also but i think on Monday i will have to phone them myself and try to explain that he does not understand fully.
 
Essentially the whole thing is just related to how much do you want to take as cash upfront, and this decision will then affect how much the pension gives you yearly as an annuity. The more you take as cash upfront, the less the yearly annuity will be.

In case you don't know, an annuity is a yearly sum a pension will pay you until you die.

See also advice from the government:

www.gov.uk

Plan your retirement income

Work out how much money you'll get when you retire and plan ahead - State Pension, Pension Credit, National Insurance
www.gov.uk www.gov.uk
 
I assume these annual pension figures are including state pension - no. He will still get his State Pension on top of his DB pension.

The lump sum figures are tax free? Yes.

The lump sum is tax free, and the pension is taxable. However, if he was Medically Discharged, the pension may be tax free too.

Option 1 - do nothing and he will receive these figures.

Option 2 - maximum lump sum, reduced pension.

Option 3 - Generate your own figures ie bigger pension or lump sum.

His health is not that great since he has been a smoker for well over 5 decades so i am thinking option 2 is best maybe - option 2 then. Also to be aware of, if he gets a terminal diagnosis, he can contact the pension team and they will sort his immediate benefits.

Lump sums come and go quickly, whereas a pension is guaranteed monthly income. However, you have to decide what's right for you (father).

https://forcespensionsociety.org/ - join these and he will get a pension breakdown. £43 for pension advice!
 
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I recently joined the LGPS also and it is more complex to plan around than DC pensions for sure.

The main LGPS website is very helpful in explaining the features and options available upon retirement (probably better than that single sheet of paper!): https://www.lgpsmember.org/your-pension/the-essentials/key-features/ and https://www.lgpsmember.org/your-pension/planning/taking-a-lump-sum/

Most things have already been covered by others, but it's also likely that it would pay out in the (worst case) event of his death to his spouse, eligible partner or eligible children. Therefore if his health isn't great, it's a more complex decision to make as then the standard benefits may have greater value than initially thought vs taking more as a lump sum. It's definitely worth getting some professional advice on before he makes a decision.

If you're struggling with the administrators of his particular fund (and as it stresses on that website, they are not able to offer you financial advice - only general help), you can also find independent financial advisers through here: https://www.lgpsmember.org/help-and-support/financial-advice/
 
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