Thanks Financial: not sure how you got that 45 and 50 figure??

*snip*

My math may be off but this is what I got from MS Excel using =RATE function...

Assuming 50 annual payments of 7200 versus PV of 200k = 2.60% rate of return

Assuming 45 annual payments of 10700 versus PV of 200k = 4.66% rate of return.

So option one to take payments at 55 is clearly worse than taking lump sum and earning 4% annually

Option two is roughly a wash but no payments for several years.

DH is 54..we have requested and obtained a UK defined benefit transfer value analysis...

Option of a) 7200 pounds of pension from age 55 onwards OR

b) 10700 pounds of pension from age 62 onwards OR

c) Cash out of 200 000 pounds now (tax free ); pension ends.

I think that Financial Velociraptor was assuming a long life for your husband of 105 years. So, taking the pension at age 50 would mean receiving 55 pension payments, while taking the pension at age 62...which Financial Velociraptor read as 60?...would result in receiving only 45 pension payments.

These payments are annual amounts, correct? I agree with other posters who say that it looks like it would be better to take the lump sum now, with just this information (and a thorough ignorance on my part of both UK and AUS tax issues!). 105 is a very long life, and anything shorter would decrease those return rates on the annual payments that Financial Velociraptor calculated. It is an even worse deal if your husband predeceases you.

If you are not familiar with the RATE formula used, you can use this same calculation by opening up a spreadsheet, and typing in a cell:

=RATE(50,7200,-200000,0)

then hitting "enter."

50 = number of years you expect to receive the pension

7200 = annual amount you would receive

200000 = lump sum payout you are not taking now (present value of this annuity)

0 = no money received at end of pension to pass on (future value of this annuity)

You can adjust any of these numbers for various estimated pension payout spans and annual payout amounts.