My natural inclination had been to take zero tax free cash (TFC), since I don't have any particular need for it. However, the commutation factor (CF) on offer is 28, which some research suggests is very generous compared to typical pension schemes. The CF on offer ramps down with age, of course, reaching 24 at age 65. I guess it's the age 65 figure that should be used as a basis for comparison when I read such things as "CF of 15 is typical, with 20 being considered the higher end of the range".
So, it's left me wondering: For a 65 year old (say) who doesn't particularly need the TFC, how high would the CF need to be before it became foolish to turn down the TFC deal?
Some specifics to illustrate my case, in case it helps:
- At age 60, receive a pension of £11,260.56 a year, or
- a tax-free PCLS of £60,695.98 and a pension of £9,104.40 a year.
- Or, at age 65, receive a pension of £15,344.64 a year, or
- a tax-free PCLS of £80,087.86 and a pension of £12,013.20 a year.
- "The commutation factors for the Scheme are:
55 = 32.19, 56 = 31.39, 57 = 30.59, 58 = 29.78, 59 = 28.97, 60 = 28.15, 61 = 27.33, 62 = 26.51, 63 = 25.69, 64 = 24.86, 65 = 24.04"
On this basis, CF of 28 is not sufficient reason to bite their hand off. Plus, there's a small LTA advantage in declining the TFC. OTOH, annuity rates are famously rubbish, so perhaps this isn't a good way to gauge the attractiveness of the offer.