Redundancy Payment - Keep it or increase pension

[AF62]

Thoughts would be welcome on this situation -

A 58 year old being made redundant and offered £100k in redundancy. All £70k above the £30k tax free amount would be taxed at 40%, so they would keep a total of £72k after tax.

Or they can give up the whole of the £100k and get a £5k increase in pension from 58 (pension will be increased by CPI and has a 50% survivors pension which also increases by CPI). The whole of their pension would be taxed at the basic 20% rate (after the personal allowance).

The person has no mortgage or debts, a paid for house, a decent amount in ISAs as a mixture of cash and investments. They have a spouse but no children or anyone else to leave money to.

Which you you pick, and why, or would you do something completely different?

[dealtn]

Thoughts would be welcome on this situation -

A 58 year old being made redundant and offered £100k in redundancy. All £70k above the £30k tax free amount would be taxed at 40%, so they would keep a total of £72k after tax.

Or they can give up the whole of the £100k and get a £5k increase in pension from 58 (pension will be increased by CPI and has a 50% survivors pension which also increases by CPI). The whole of their pension would be taxed at the basic 20% rate (after the personal allowance).

The person has no mortgage or debts, a paid for house, a decent amount in ISAs as a mixture of cash and investments. They have a spouse but no children or anyone else to leave money to.

Which you you pick, and why, or would you do something completely different?

How old is the spouse, as that will be a factor in the value of the "survivors pension"?

[AF62]

Thoughts would be welcome on this situation -

A 58 year old being made redundant and offered £100k in redundancy. All £70k above the £30k tax free amount would be taxed at 40%, so they would keep a total of £72k after tax.

Or they can give up the whole of the £100k and get a £5k increase in pension from 58 (pension will be increased by CPI and has a 50% survivors pension which also increases by CPI). The whole of their pension would be taxed at the basic 20% rate (after the personal allowance).

The person has no mortgage or debts, a paid for house, a decent amount in ISAs as a mixture of cash and investments. They have a spouse but no children or anyone else to leave money to.

Which you you pick, and why, or would you do something completely different?

How old is the spouse, as that will be a factor in the value of the "survivors pension"?

58 and also being made redundant at the same time, with a similar but slightly lower redundancy offer - everything in joint names so also no debts, etc. etc.

[TUK020]

Horses for courses, but for me personally it would be a no-brainer.

I like the idea of having my wealth in a mixture of assets - property, defined benefit pension (equivalent to index linked bonds) and equity investments, + cash buffer.
In the position described, having additional defined benefit is attractive.

If you took the retained 72K and spent it on an annuity, CPI index linked, and 50% survivors pension, from age 58, I suspect 72k would buy you an income of less than 2k.
The alternative being offered is 5k. Grab it.

[monabri]

IF you were to take the money, please let me know where you effectively can get 6.94% gross interest (5k/72k) guaranteed with a cpi boost year on year and a 50% spouse's payment if you shuffle first. The thought of losing money at 40% tax rather than 20% also grates.

Personally, I'd definitely take the 5k option but then if said person is in poor health then they might go for the cash upfront ( despite the 40% tax hit )