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    Commuting pension for lump sum

    Next January I will qualify for a small preserved pension (around £500p.a) from a former employer. Such a small amount should prove a bothersome administrative burden on the Trustees, so I imagine they will wish to offer me alump sum to "buy out" their obligation. What would be a reasonable sum/ term in pension years to settle for?

    11 Comments

    best thing to do is seek financial advise, got to a financial adviser who doesn't charge money for an appointment..

    This will depend on how old you are now, how long you may expect to live (are you in good health?) and if you want or need the money now.

    If you are say 60 and in good health you may expect to live 20 years or more, so that would pay you over £10,000 in the next 20 years (and the pension may rise).

    But of course you may not see out the next 20 years so may only take say 5 years of the pension, earning you only £2,500.

    Also if they do buy you out and they give you a lump sum the interest you earn will be very little as interest rates are so low at the moment.

    I am no financial expert, and have no idea of what you can expect, but I would say if you can get £5,000 out of them you will have done OK (this assmes your current age is around 65). This equates to 10 years of the pension.

    Remember though that a pension is for the rest of your life, so that small amount per year may come in useful in the future. Dont let them talk you into taking a lump sum if you dont want to.

    p.s.I would perhaps got to the CAB (Citizens Advice Bureax) to get free advice from them.

    Let me know your age and sex and confirm that you have no health problems and I'll calculate it for you.

    Also confirm that the pension is 'fixed', IE £500pa, or will it rise every year.

    Original Poster

    Thanks for the input so far.... I'm male and i'll 65 (qualifying age) on 8 Jan 2010, (History of heart trouble / quintuple coronary bypass jan 1995), diabetes type 2 (tablet contolled) since 2000, asthma since 2007. Otherwise Im in great shape!!:whistling: Pension is fixed.

    MIZEEKS;4592160

    Thanks for the input so far.... I'm male and i'll 65 (qualifying age) on … Thanks for the input so far.... I'm male and i'll 65 (qualifying age) on 8 Jan 2010, (History of heart trouble / quintuple coronary bypass jan 1995), diabetes type 2 (tablet contolled) since 2000, asthma since 2007. Otherwise Im in great shape!!:whistling: Pension is fixed.



    Blimey, I'd take a grand if I was you, lol, only joking!

    To be honest, with your medical history, any offer over about £3K is good. If you'd been in perfect health, I would've said double that. Even with interest rates so low, a bird in the hand and all that, I'd go for the lump sum everytime. You'll hardly notice 500 quid a year, but at least you can have a decent holiday/car with a lump sum.

    I'd probably propose a lump sum of £5K, say it's negotiable and let them knock you down a bit. Are they aware of your health history?

    Take the fifty quid and have a great night out, but be quick. Before :santa: anyway

    Whatever you do - don't get stressed about it:w00t:
    I'm assuming it's a small outfit and you are known to the trustees. Do they know your medical history? Might have to take a lower sum if they do, like trickyjabs says. I think that ten years worth of lump sum would be reasonable but I don't know whether that would be tax free. Do you actually want to money to go on anything in particular?
    Is there a likelihood of them going bust and taking your pension down with them?

    Original Poster

    Trickyjabs;4592382

    Blimey, I'd take a grand if I was you, lol, only joking!I'd probably … Blimey, I'd take a grand if I was you, lol, only joking!I'd probably propose a lump sum of £5K, say it's negotiable and let them knock you down a bit. Are they aware of your health history?

    Original Poster

    Very large construction company - it's over 30 years since I worked for them, - They are not aware of my medical history and initially at least I'd say it's unlikely they'll make such enquiries;-)

    Original Poster

    oxter;4592492

    Take the fifty quid and have a great night out, but be quick. Before … Take the fifty quid and have a great night out, but be quick. Before :santa: anyway



    If I get 55- do you wnt to join me for a big blow out? - Or is that tempting fate too much??;-)

    MIZEEKS;4593466

    If I get 55- do you wnt to join me for a big blow out? - Or is that … If I get 55- do you wnt to join me for a big blow out? - Or is that tempting fate too much??;-)



    Well done MIZEEKS you have a sense of humour. Kebab shop and a pint?
    Whatever you decide, enjoy it and have a long happy fun/no work time
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