Nathan wishes to retire in a few months when he turns 60. He can either take an annual pension of $27,000pa for life, non-indexed, with a 70 percent reversionary to his wife, Alana (age 57) for life. Or alternatively, Nathan can take a lump sum of $330,000. Nathan is not sure which would be the better choice, non-indexed pension or lump sum?

Their assets include a house with a conservative market value of $900,000, He has other financial (Managed fund (balanced)) savings of one million dollars. They are both still working. They do not have any debts. Nathan and Alana understand there are pros and cons associated with taking a pension or a lump sum. Given the pension will not be adjusted by CPI, their decision is somewhat harder.

Nathan and Alana worry that in 10 years, $27,000 today will be worth not much, and will be worth nothing in 20 years. Should Nathan take the lump sum or pension?