"Don’t just commute because everyone else is doing it"

Jayne explains how a change in finances can impact on your life:

I guess the first thing to say is that change is inevitable, but it doesn’t have to be scary. For a start, you’re not necessarily going to be that much worse off. Disposable income is often higher in retirement, especially if you’re clearing your mortgage. And deductions aren’t as high from your pension as they are from your take home pay.

You’ve got to decide whether you want to give up some of your income and take a lump sum (commutation) or have a higher monthly pension. Colleagues often argue that a commutation is best, but it may not be necessarily best for you.

I would encourage those approaching retirement to use our online commutation calculator to compare an estimate of your annual pension v lump sum. It’ll also give a good indication of how much your pension will be worth in comparison to what you’re taking home now.

Commutation or not?

You need to consider why you want a lump sum first. Is it to spend and enjoy? Are you planning to start a new business? Or is it to pay off debts like your mortgage? Whatever your reason, you must be prepared to take a lower monthly income if you go for the lump sum. And as everybody is living longer, pension-takers will no doubt receive more in the long run by not commuting. However, access to a lump sum gives you opportunity, especially by saving and investing wisely. Lots of things to weigh up.

I always ask individuals to put together a budget plan. This way you’ll have a clearer picture of what income you’ll need, things you’ll want to plan ahead for and the funds you’ll have available to invest. For example, you’ll need to think about the kids going through university, a wedding or even if the house is going to require some sprucing up. Is a new car on your radar? You’ll need to put together a 15 year plan – not easy, I know, but I’m here to help.

There’s certainly much to consider. Of course, I’ve pretty much heard it all and I’m a good listener if you need to bend my ear. In the meantime, why not use the budget calculator and commutation calculator to see what your state of play is. Good luck to all.


Jayne Dennis
Learning and Development Consultant