BOI voluntary redundancy - option A or B?

K

katie_noah

Registered User
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Hi there.

A friend of mine has applied for VR from BOI and is leaving next month. She is 53, no dependents, lives alone. Mortgage has 21k left on it. Next week she has to choose Option A or Option B when she formally accepts the VR deal. A means the right to a tax-free lumpsum at retirement age. Given that she joined the bank late as a "Yellow-pack" entrant, this lumpsum is likely to be about 28k. She's been given an indicative figure only and can't seem to get any more definitive figures from BOI. If she opts for option B, she doesn't get the lumpsum but instead, gets a higher redundancy payout now.

Any wisdom on what she should focus on when making this choice? Bigger payment now to clear her mortgage and no lumpsum? She knows she will have to do some p/t work to supplement herself with either option.

Thanks in advance, Katie
 
All I can say here having been in the same position 10 yrs ago is I went for the 'bird in the hand' option and took the bigger payout at the time. Who knows what will happen between now and retirement age! Still happy with my decision and wouldn't do it differently.
 
Would need more information to make a decision, how many years service, is it a DC or DB Pension scheme.

Waiving your right to a Pension lump sum, is not always the best option. That amount will grow significantly over time,(it could potentially double in 15 years) and most likely grow significantly more, than she could grow the fund herself, if she invested the bigger payout on redundancy, and is almost always paid out tax free.

Waiving the lump sum, is often more appropriate for employees,very close to retirement. Age 53, is almost 15 years in advance, of receiving the state contributory pension, thats a long time.

It sounds like, the redundancy payout would clear the mortgage anyway, under option A.
 
Many thanks for your comments. Have passed them on - she has to decide this week so appreciates all of your feedback.
 
Is 28k the Future value of the lump sum on retirement or the actuarial discounted to today value that her redundancy tax free lump sum will be impacted by? Does she also have the expected ex-gratia and other figures available before she makes this decision?

OptionA to preserve the pension lump sum is often advised in these situations - but I think it depends on how optimistic your outlook is - Are you in good health, expect to live long into retirement, have enough to live on between now and then, don't have any big expenses or loans not covered by any remaining lump sum etc

If you are a live for the moment kind of person, having that extra tax free cash now could be life changing when you can still enjoy it, though no trips around the world just yet!
 
Hi - as a follow on to the question raised and apologies if its a stupid question - am I right in stating that if there is no difference in pay out under option A or option B then you should select option A and retain the right to the pension lump sum.
 
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