which option ?

[gun12b]

The initial message was deleted from this topic on 26 July 2015 at 16:29

[slybynight]

You lucky bu66er! Sounds like a no brainer option 2 to me.
repeat.
You lucky bu66er.

[peter tdci]

Even if you got no return back on the 60k, it would be nearly 30 years before the cash value of option 1 caught up with option 2.

[Ozzie Osmond]

gun12b said:

retiremnt,
option 1 £911 a month. (£10,932 p.a.)
option 2 60k lump sum, plus £740 a month. (£8,880 p.a.)
which option do you think is the best for 50 year old.

£911 - £740 = £171 p.c.m difference. Which is 2,052 p.a. But you receive £60,000 cash, which is a ratio of 1:30. That's about the right conversion ratio. So in both cases the basic value is around £328,000.

BUT what will be your rate of income tax in retirement?

If you will be a 40% taxpayer (due to other income/pension) the "tax free" £60k is worth a great deal more to you.
If you will be a 20% taxpayer (due to other income/pension) the "tax free" £60k is worth a bit more to you.
If this pension is your only income you'll be paying negligible tax in any event so it's pretty much breakeven. Although in 15+ years time that would change if you are able to draw a state pension on top.

What would I do?
If it's an index-linked pension from the public sector or a huge company with an excellent pension scheme it would be tempting to consider leaving in the full amount, unless you will suffer significantly for income tax (see above). Financial security to age 100 and more!
If it's anything else I'd probably take the tax free cash and invest it in a stocks & shares ISA (over two years if necessary for self/OH) to have the cash in hand and the prospect of further tax free income/growth, albeit running the investment risk yourself.

and if you've got mortgage or other debts then clearing them with the immediate cash might tip the balance in that direction.

[R1 Indy]

Option 2 and spend it while you can!

No point saving it for when your too old to spend it!

[ghamer]

I'm in similar situation albeit in 10 yrs. My forecast thus far £21500/yr or lump £115,000 and £16500 per yr.I will take the lump sum and enjoy a lot of sunshine.My advice is take the lump as you only get offered the once.

[Simpo Two]

R1 Indy said:

Option 2 and spend it while you can!

No point saving it for when your too old to spend it!

Option 2b - spend some of the £60K on the dream holiday but re-invest the part you don't need yet. Then you still have it for the future, but not in a pension straitjacket.