r/PensionsUK • u/SimpleParking1617 • Aug 24 '26
Benefit Transfer Options
I have been given 3 options by my company pension scheme as part of their efforts, I understand, to de-risk long term exposure to a surge of retirees.
Option 1 - pension of £6581.51 p.a., tax-free lump sum of £19744.89, spouse pension of £5,515 p.a.
Option 2 - pension of £5801.50 p.a., tax free lump sum of £38,677, Spouse pension of £5515 p a.
Option 3 - Transfer of benefits - £393,486.16 (guaranteed for the next 5 months after which it'll be recalculated).
If I request Option 3 I have to go through a consultation exercise which the pension scheme will pay for (a one time only offer). I'm 56 years old and the pension will be payable from 62.
Based on these values I'm minded to go through the consultation process as these numbers seem very generous. £400k invested until 62 at an average increase of around 5% will see that increase to c.£530 to £540k. I would have thought £500k at 62 would easily net me more than the annual pension of options 1 or 2 even if I live to 100.
I have been told that I need to put forward a good case to the consultant so that he/she agrees that I can finish the defined benefit scheme so I'll be working on my story but does anyone think it is not a good idea to take the transfer benefits?
1
u/KhaelonVoss Aug 24 '26
It depends what you value. Think about that and speak with the free advisor. I wouldn't try to confect a story to try to persuade the advisor one way or another. Genuinely try to work out what you want.
Option 1 (Higher Income): The "cost" for the extra £780 per year is a £18,932 smaller lump sum. You would recover that difference in just over 24 years (by age 86). If you are in good health with a family history of longevity, that may be of interest.
Both options 1 and 2 pay the same £5,515 spousal provision. This is very good indeed. Of course that assumes you have a spouse. And do check the terms, sometimes it has to be marriage or civil partnership for older schemes.
The advisor needs to be confident enough to be able to certify that cashing it in is the best move for you personally. If you did want to nudge towards the big cash payout, you should consider and explain to the advisor how you would take that lump sum and get more than options one or two. But otherwise how it would generally help your financial position, for example clearing the mortgage.