Standard practice here when one applies for the state pension is to be offered a choice of either a weekly income stream, or a reduced income stream in return for an additional tax free lump sum. The question is how in the current environment to make an informed choice - which to me means working out the "return" that would result from NOT taking the lump sum, and comparing this with the reduced income stream from taking it.

I am waiting to be told what the exact data would be. In the interim I imagine that the procedure would be to obtain the "discounted cash flow" or "net present value" - ??? this is where I am unclear - of the two income streams, and express the difference between them as a percentage of the lump sum to give the yield of the latter.

Is my reasoning correct, and what formula would I use to generate the DCF's / NPV's?

Tks