Robert asks:

I retired on Friday 29th January and received my final salary pension figures on Saturday 30th. I will be going back to work at the same job for 18 hours per week. My problem is would it be better taking big sum and small pension or smaller sum and bigger pension due to tax after returning to work? I worked for the company for 35 years and been in the pension fund 31 years. Any advice would be helpful.

This has to be a personal decision. Most people in my experience opt for the maximum tax-free cash lump sum they’re able to take, but don’t always appreciate how much they are giving up by way of lost pension for life by so doing. I couldn’t say which is best for you, but the things you need to bear in mind are:

The cash sum is tax-free; but
The smaller pension you will be paid will be for the rest of your life.
Have you any immediate plans for the cash sum? (such as to clear debts or buy something you’ve been planning to buy for a long time?)
Otherwise, is the amount of pension you are giving up for cash a good deal?
Would reinvesting the cash produce an income anything like the level of pension you are giving up?

Pension income is taxable as are earnings, but your earnings will stop one day.x

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