Always take the Lump Sum?

[KevjustKev]

This month I can take early, very early, retirement due to my body braking down and bits not working as good as they once did. OK I'll come clean, ill health.

It's quite a bit more than I thought i was going to be able to get, yet not a fortune be any means. The lump sum will be more money than just about I've ever had in one go.

The difference a week is only around £20. 

The lump sum, as is the pension AFAIK tax free. However could this effect my benefits? I'd rather not contact the DWP, it might give them ideas.

A little help? 

[sixgun]

If you have ill health i would take the lump sum - it is cash you have in hand, not cash you might get. 
Now for some that sum will be frittered away and they would have been better not taking the lump sum. 
The trick would be to invest it in such a way that you could liquidate the value if needed but it will grow. Personally i expect many paper assets to go to rat sh it. 

i have no idea about benefits as i have never received any.

[Clockpuncher]

What’s the commutation rate - ie how many pounds upfront are they paying you for each pound of annual income you are giving up?

usually the rate on state schemes is pretty low - eg £12 upfront for each annual £1 forgone or 14x whereas if you look what the market rate to do the opposite is by buying an annuity (ie turn a lump sum in to an inflation linked income for life) then it can easily be 30-40x.

The inflation index income is a very valuable benefit so don’t give it up lightly.

As mentioned above, you do need to weigh this up though against your life expectancy and if your health is going to prevent you being around in the long term to collect the rising income.

[KevjustKev]

6 hours ago, Clockpuncher said:

What’s the commutation rate - ie how many pounds upfront are they paying you for each pound of annual income you are giving up?

usually the rate on state schemes is pretty low - eg £12 upfront for each annual £1 forgone or 14x whereas if you look what the market rate to do the opposite is by buying an annuity (ie turn a lump sum in to an inflation linked income for life) then it can easily be 30-40x.

The inflation index income is a very valuable benefit so don’t give it up lightly.

As mentioned above, you do need to weigh this up though against your life expectancy and if your health is going to prevent you being around in the long term to collect the rising income.

Wot?

[Clockpuncher]

3 hours ago, tallthinkev said:

Wot?

On commutation, read this: https://www.unbiased.co.uk/news/pensions/should-i-take-my-pension-lump-sum

You need to weigh up:

• Are getting a good deal on turning annual income in to an upfront lump sum? (commutation rate is critical to understand this) 
• Does your ill health significantly impact your life expectancy? (as this can make a bad commutation rate a reasonable one for you if your life expectancy is significantly reduced by ill health)

The £20 per week pension, index linked to inflation and paid for life would likely cost you somewhere in the region of £30,000+ to buy in the market, maybe a bit less depending on what the exact nature of the poor health.

Unknown on the benefits angle

[KDave]

Check the commutation, may be worth taking the income especially if inflation linked. 

Arguably benefits angle the lump sum is better if converted into something they can't measure or us protected - invest it all in a sipp, or covert to metals, something they can't point to as an asset. Otherwise they will expect you to spend your savings before giving you a penny. I think you can only have about 6k in savings while on bennies. 

If keeping it as income, benefits will likely be less, offset against the income from pension I think? Not sure though.

Financial advisor territory this I think mate. 

[Stu]

PIP/DLA are not means tested as far as I know so savings are not an issues.  Other benefits which are means tested are limited on a sliding scale from 6 to 16k, thereafter get zilch. Worth checking with your citizens advice peeps. 

[KevjustKev]

17 hours ago, Clockpuncher said:

 

As mentioned above, you do need to weigh this up though against your life expectancy and if your health is going to prevent you being around in the long term to collect the rising income.

Life expectancy? Really didn't think I'd make it to 30! Everyday over 40 has been a very unexpected bonus

7 hours ago, KDave said:

Check the commutation, may be worth taking the income especially if inflation linked. 

Arguably benefits angle the lump sum is better if converted into something they can't measure or us protected - invest it all in a sipp, or covert to metals, something they can't point to as an asset. Otherwise they will expect you to spend your savings before giving you a penny. I think you can only have about 6k in savings while on bennies. 

If keeping it as income, benefits will likely be less, offset against the income from pension I think? Not sure though.

Financial advisor territory this I think mate. 

Getting stuff to an advisor within the next few days.

[KevjustKev]

Took 3/4 of the lump sum, (thanks for your comments) now I can't get cash from of the bank, I haven't got ID! Yes it is quite a bit of cash in one go, and I asked if I needed to give them a day of so, yes. Fair enough. Yet it has to be approved by the manager, and have show my driving licence or passport. I haven't got those, I opened the account without them, whats the deal? Some stupid money laundering c**p?