Am just about to retire and start the see the proceeds of an occupational pension. I need to decide whether to take the standard (25%) lump sum and the rest as pension or whether to increase or decrease the lump sum. The effect of a slightly larger lump sum is a smaller pension and vice versa. What factors should be weighed when deciding between the standard option and a larger or a smaller lump sum? I can exclude the more pressing ones such as an immediate need for max pension or an urgent wish to blow as large a lump sum as possible. The commutation factor is about 7.7%. A larger lump sum could be invested but 5% would be the max one should take in income. The larger savings stay there with a larger lump sum which presumably offsets the 2.7% or more reduction in income. With a larger pension and smaller lump sum there is a larger secure income, but less savings for the longer term. What else needs to be weighed up?
David M.