It really depends what your objectives are!tractorboy2 wrote:I have been contemplating retiring at 60 which is around 16 months away, so let me see if I can clarify what I mean regarding the lump sum.
If you take the lump sum and your only plan is to use this to bridge the gap to State Pension , you would divide the lump sum by 84 (7 years * 12 months) to give yourself a monthly amount to play with.
But the difference between the full pension and reduced pension when multiplied by 84 is almost going to equal the amount you got as a lump sum. Which after the 7 years (taking it all as pension) you would still be getting that difference , whereas the lump sum would be gone. Under the scenario I have illustrated ( clearly hopefully) is there any benefit in taking the lump sum ?
ps Thanks RobertT
In pure money terms, for section C members taking no lump sum and a larger pension will, on average, be better off over the long term due to the fact it's index linked and paid for life. Whereas the lump sum would be gone in 7 years.
But utilising the lump sum from 60 to 67 would increase your income for that time and could therefore enable you to retire at 60, whereas just having the larger pension might not.
It's just a case of weighing up the pros and cons and going with what's right for you. Some people might be willing to take the smaller pension in return for retiring up to 7 years earlier than they would have done otherwise. Others might not.
*Stephen makes a good point in his post above, about section B members commuting their lump sum to pension, as it doesn't offer particularly good value. But as you're in section C, it doesn't apply directly to you!
The commutation rates for section C members wanting to give up some pension for a lump sum, are better than for section B members wanting to do the opposite.
