Lump sum v monthly pension.

[CanaryShoulderedThorn]

DH retires soon and has been told he will have approx £2k per month as his pension.
He will not get a lump sum but can apparantly convert some of the monthly pension to a one off payment.
We would like a lump sum of £50k, does anyone know, on average how much of his monthly payment that would cost?
Thanks so much.

25% is tax free, so probably £1,500 remaining pm?

What scheme is he a member of? Is it a defined benefit scheme?

Thank you for the replies, It's the teachers pension scheme, we are hopeless with finances but pretty good at living frugally.
So as a rough estimate £100 of monthly payment would equal £10k as a lump sum?
Yikes!

There are various calculators on the TPS website which should be able to answer your questions!

www.teacherspensions.co.uk/

I'd take the lump sum and invest it this will give a return. But first it really is worth seeing a financial advisor. My dad took his lump sum, invested it and lived off the interest but also had another pension running alongside it. Luckily he did that. He unexpectedly died within months of retirement. If he had taken the monthly pension payment my mum wouldn't have been entitled to much of widows pension from it. But with the lump sum, it transferred to her and now she lives off the interest from it or can spend it how she sees fit. But you really need to seek advice from an independent financial advisor not MN. It'll be the best thing you do

Approximate £24k of pension means his maximum lump sum would be about £102k. Leaving a residual pension of about £15k. The conversion factor is 1:12.
So if he wanted £50k lump sum he would have to convert £4166.66 of pension. Leaving a residual pension of about £20k

Thanks for your replies.
I will get him to see a financial advice, we had never thought of taking the whole thing as a lump sum.
My poor father also died at 65, just after retiring but my mum still receives his entire pension, he was in the private sector though.

You will not be able to take the whole pension as a lump sum it is far too big.

Oh thanks Polka.

You can usually take around 25% of the pot maximum as a lump sum. However, especially now, remember that the pension will be index linked to CPI so goes up by CPI inflation every year whereas the lump sum will only increase by whatever return you invest it in eg bank account would be less than 2%. You would get half his pension if he were to die before you.

Thank you. Its a big drop in income and a bit daunting to be honest. I'm 10years younger so will continue full time, but with the rising energy bills 😕

Your husband should be able to get an indication of benefits from the scheme administrators. This will show the maximum lump sum he can take and the reduced monthly income. You could also ask for an indication with a £50k lump sum.

I’ve already worked it out for OP above based on the pension figure she provided

Does he have to retire soon? As in, given the energy bills rising etc would he be open to working for another year?

That may be because although he commuted some of his pension, on his death some pensions schemes "reset" the pension and pay the dependents pension without any deduction for the lump sum

Op was asking about her husband taking his pension as a lump sum. It is too big to trivially commute

He needs to speak to his pension provider and get them to run through the various scenarios available to him (is it DB, DC, will he be buying an annuity etc?).
His provider is unlikely to be able to offer advice so he would then have to speak to an IFA who can advise him depending on what your long & short term plans are.

Generally you can take up to 25% as a tax free lump sum (it is possible to take more but it is taxable) but you have to decide if you want a larger lump with smaller annual or the other way around.

It can be very complicated, make sure you go into it with your eyes open.