Important Facts Surrounding The Pension Lump Sum

Decisions centred on pensions are very serious ones indeed

, because the effects of those decisions can have far reaching consequences. In this article we'll look at some of the basic facts surrounding the pension lump sum, when compared to others pension set ups.

For example, someone might have a choice to make as to how they take their pension; they may decide between 20,000 a year, or an 80,000 lump sum followed by 15,000 a year. Given such a choice, it is important to seek good, reliable advice on the subject, so that the most appropriate decision is made.

If you yourself are confronted with such a choice, then it is important to ask yourself of a series of pertinent questions and answer them honestly. For example, do you have a spouse or a partner? If so then you should find out if they get the pension when you pass on. Do the pension payments increase each year? Are you in good health? The answers to these questions and others will help you make wise decisions relating to your lump sum pension issues and the amount of pension that you can then take, going forward.

In the eyes of some advisers, it is important to recognise that the final salary pension scheme is sometimes underestimated. In some cases, a final salary pension can be worth several hundred thousand pounds. Even though it may seem expensive to obtain advice from a local pension adviser, when you consider the amount of money involved with lump sum pension issues, it is actually well worth the spend.

If you choose to take a lump sum pension, you are permitted to take up to 25% of the pension pot value without paying tax. The actual amount available to you will depend on the rules of the scheme to which you belong, as will the amount of pension that you will have to sacrifice (if any at all) in order to achieve it.

The key thing to remember when looking at the issues surrounding the lump sum pension is that if you take out a larger sum, it will reduce further the annual amount you receive.

A lump sum can help you enjoy life in the present moment a lot more; perhaps taking a round the world cruise, paying off your mortgage or helping out relatives with their living requirements. However, long term planning must also be taken into consideration, to ensure that you have a long and happy retirement.

In order to get more detailed advice on the lump sum pension you should seek out a one to one advisory service that focuses on this area.

by: Anna Stenning

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