FLEXIBLE RETIREMENT INCOME FOR PSS MEMBERS
If you are a member of the Public Sector Superannuation Scheme (PSS), you may be entitled to generous benefits when you retire or take a Voluntary Redundancy (VR). Generally you have the option of taking a full pension, part pension, or full lump sum for your PSS benefit. So how do you decide which one is the best option?
PSS Lump sum or pension – what is the best option?
For most people taking a lifetime, indexed pension is a no-brainer. We’re all living longer, and the option of having a pension that increases each year is an easy decision. This pension is paid until we pass away – or longer if we have a spouse – resulting in a significantly higher total benefit than the lump sum option.
Other people, say those who still have a considerable mortgage on their home when they retire, may opt for part of their PSS benefit to be paid as a lump sum, and some as a pension. This may allow them to clear all or most of their loan. It will reduce expenses in retirement, while still receiving an indexed pension in their retirement years.
However, once that decision is made, there is no turning back. There is no way that you can change your mind and vary the outcome that you’ve selected.
PSS Pension does not allow lump sum withdrawals
What happens if you do choose to take the full pension but later need some money? You might want to take a holiday, help your children with a home deposit, or buy a new car. If you’ve opted for the pension and don’t have any money set aside ‘for a rainy day’ you may not have enough money set aside. You may need to wait and save up for those bigger purchases, or take out a loan to fund them. Once the pension option has been established, you are not able to withdraw lump sums from your PSS entitlements.
Creating second, flexible pension may be a good option
If you haven’t yet retired, there is still time. You can create a flexible income stream for your retirement years that will allow you to withdraw lump sum amounts if you need them. Members of the PSS do have the option of establishing a second superannuation fund. This means when they retire they can have both the indexed, lifetime pension from the PSS and a more flexible account based pension from the second scheme. Employer contributions must be paid to the PSS, plus a certain level of member contributions to ensure your benefits are maintained. However, you can direct spare cash to another fund and invested in line with your goals. Once you have retired and are able to withdraw from this fund. You can take regular pension amounts to supplement your PSS income. Plus if you need them, you may be able to withdraw lump sum amounts for those larger purchases.
A flexible retirement strategy that takes into account your need for income and cashflow is essential. Don’t wait until you are close to retirement. Talk to a Milestone Financial Planner today.