Take the lump sum or take the increased annual pension?

JoeRoberts said:
All the other factors should be considered but I think the main one is his tax position, what will the marginal rate be on the extra 5k.
If we say 28% ?? ( then his payback period rises to around 14 yrs )
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I will have a very low income. The work pension and the state pension. However I may have to pay some tax on these combined amounts so the payback period could easily be 14 years.

I am male and 64 years of age. Married. In relatively good health. Non smoker. Both my parents lived in to their 80'a and 90's. (My father got 30 years out of his work pension.) However my lifestyle would not be as good as theirs.

I take on board what Bronte was saying. I may have no inclination to do much after I turn 80 however I may need home care or nursing home at that point in time and the extra €5k per annum could come in handy.
I can fund most things at the moment from my maturing An Post, certs and bonds, purchased over the years. These are paid DIRT free and from reading past posts on AAM I always thought that these were tax free. Interest not counted as income. I may be completely wrong on this and if that is the case then with the interest added to my work and state pension the payback may even extend beyond the suggested 14 years.

If I take the lump sum now it will probably sit in my current account or a new An Post cert or bond. I have no inclination to purchase a new car, kitchen or go on a world cruise. Mortgage has been paid and my children are in a good position financially.

In a way I am answering my own question here. I should not take the lump sum but part of me, from experience, certainly knows that a bird in the hand.......
 
Dear Isle of Man ,

50% take it .
50% don,t take it .

As my dear deceased Uncle Frank used to say {take all the advice you can , then do whatever you think yourself}
Good luck.
 
I've dealt with about 40 retirements from a previous company over the years. I wasn't advising people but would be involved in the paperwork etc so would know their intentions and thought process re TFLS.
Invariably, females took the absolute maximum TFLS and males took none or maybe 50%. Rarely did males take the full unless they had AVCs. Their main reasoning was they were afraid their wives would spend the lump sum. They all had financial advice re the options etc but usually it boiled down to simple ideas and fears.
 
IsleOfMan said:
I am due to get a small pension next year. €20k per annum or €15k per annum plus lump sum of €50k. (figures rounded).

I don't need the lump sum but I am wondering if I am being foolish in not taking the tax free lump sum.

I expect not to be paying tax on my monthly pension if I opt to take the full €20k. If the state pension is added to my work pension of €20k, will this push me in to a tax bracket? My total annual income with work pension and state pension will be about €32k. (I have money in An Post savings Bonds/Certs to live off).

It will take me approximately 11 years to earn the lump sum back if I opt for the annual pension rather than the lump sum. After that I am on free money so to speak.

I could always take a smaller lump sum and increased annual pension but down the road tax rules might change.

Is the lump sum in the hand now the better decision?
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One thing also worth considering is the income limit for the issuing of a medical card. Also, are there things you might need to do to your home to make it easy for you to get around in it in several years time, stairlift, ramps, etc.
 
Gerry Canning said:
Dear Isle of Man ,

50% take it .
50% don,t take it .

As my dear deceased Uncle Frank used to say {take all the advice you can , then do whatever you think yourself}
Good luck.
Click to expand...
Or, for a modern take on dear Uncle Frank's adage:
1*yN2Xhv-M5PPerWzDVNt3sw.jpeg


:D
 
Sarenco said:
Interest received on State savings products is not taxable so that's not a relevant consideration.
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Is the income received from State savings products taxable as income and must it be declared on an annual basis. Some interest is only paid after 5 years. How do you do an annual return if it is only paid after 5 years?
 
Interesting. Does the interest have to be declared when making a tax return even if it is free of any form of tax?
 
Thanks Sarenco for posting that link. Can I take this a stage further.

Does the Department of Social Welfare also ignore State Savings as a source of income in their means test calculations?
 
Certainly with all the negative comments about pension plans circulating at the moment I have to say that I will be inclined to take my full tax free lump sum from my DB pension rather than a reduced tax free lump sum and higher pension.

As someone else commented. It is amazing all the effort being put in to Water Charges protests and the pensions time bomb is not even being talked about.
 
IsleOfMan said:
I am due to get a small pension next year. €20k per annum or €15k per annum plus lump sum of €50k. (figures rounded).

I don't need the lump sum but I am wondering if I am being foolish in not taking the tax free lump sum.

I expect not to be paying tax on my monthly pension if I opt to take the full €20k. If the state pension is added to my work pension of €20k, will this push me in to a tax bracket? My total annual income with work pension and state pension will be about €32k. (I have money in An Post savings Bonds/Certs to live off).

It will take me approximately 11 years to earn the lump sum back if I opt for the annual pension rather than the lump sum. After that I am on free money so to speak.

I could always take a smaller lump sum and increased annual pension but down the road tax rules might change.

Is the lump sum in the hand now the better decision?
Click to expand...
Small???:confused:
 
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