1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.
  2. Hi Guest, welcome to the TES Community!

    Connect with like-minded education professionals and have your say on the issues that matter to you.

    Don't forget to look at the how to guide.

    Dismiss Notice

Lump sum question

Discussion in 'Retirement' started by Beauherne1990, Feb 23, 2020.

  1. Beauherne1990

    Beauherne1990 New commenter

    What does it mean by 'automatic' lump sum as opposed to 'optional'?? I know you can reduce your pension & get a larger lump sum, but the figure for the 'automatic' is larger so I am confused!
     
  2. diddydave

    diddydave Established commenter

    In the final salary scheme there is an automatic lump sum that is equivalent to 3 times the annual pension (the final salary part only).

    The optional lump sum is an amount you can get by giving up part of your pension (up to 25% of it). It is 12 times what is given up. So if you had an annual pension of £12,000 you could give up a maximum of £3000, taking the pension down to £9000 a year and in return get an extra £36,000 lump sum.
     
    Beauherne1990 likes this.
  3. Brianthedog

    Brianthedog Occasional commenter

    I reduced my pension to £12500 and took an optional lump sum of £36k on top of my automatic lump sum of £44k so got a final lump sum, tax free, of £80k. You can't reduce your automatic lump sum to increase your pension.
    Paying off my outstanding mortgage cost about £18k and saved me around £1k in interest, plus reduced my monthly outgoings by £630. I spent another £10k on much needed new windows and roof. Now I have a house that's practically been rebuilt so will, hopefully not need any big amounts spending on it before I pop my clogs (unless I need a stair lift innyears to come ).
     
    Beauherne1990 likes this.
  4. Bedlam3

    Bedlam3 Star commenter

    @Brianthedog - you have also reduced you annual pension down to your personal tax allowance so no tax to pay which I assume was intentional?
     

Share This Page