In October 2015 the UK Government will allow eligible pensioners to pay a capital sum in exchange for an enhanced pension. The additional pension [indexed to CPI] is payable one week after the capital payment is made and continues until death after which 50% of the enhanced payment is made to the partner until their death. The enhancement can be between £1 and £25. The capital sum payable is age related and can be ascertained from the Government web site. Thus the initial enhanced pension and the capital sum required to secure that payment are known.
Clearly the capital sum paid is “lost” after payment and is not available for earning interest. The benefit is also clearly affected by the duration of the enhanced payment [your date of death] and the partners death also.
Can anyone advise me whether it would be possible to create a spread sheet that would show a rate of return [positive or negative] for any investment made? I have in mind being able to input variables such as:
1. Interest rates available in the general market.
2. Years enhancement is drawn – 10,15,20 years etc.
3. Years partners 50% enhancement is drawn – 10,15,20 years etc.
4. Rate of CPI increase to be applied to annual adjustment of enhancement.
and then play "what ifs" as each variable is changed.
If it is possible to create a spreadsheet I should be grateful for advice on the structure and formulas required.