But, if you take the lump sum and take 4% a year from it, the amount will be far less than the pension.
Like you, I had no effective choice. The lump sum choice was not a competitive one. It seems that they have some options in calculating the lump sum, and in my case the lump sum was about 6x the annual payment, which far less than half the amount from annuity calculators. The reason they could offer the lowball cash out had to do with the annuity being enhanced by an early retirement offer vs. the lump sum being calculated based on a deferred, beginning at age 65, pension.
However, in response to the quote above, I think that is not quite a fair comparison. The 4% is an initial amount and is inflation adjusted, so the initial amount will be less than the pension. For example, using the 100% survivor annuity above, the lump sum is $210,082.79. With 3.50% inflation, and a 4%SWR:
year annuity SWR inflation(CPI style)
1 $1,066.34 $700.28 100
2 $1,066.34 $724.79 103.5
13 $1,066.34 $1,058.17 151.1
20 $1,066.34 $1,346.28 192.3
21 $1,066.34 $1,393.40 199.0
30 $1,066.34 $1,899.06 271.2
The crossover in actual dollars is in year 13. At year 21, the pension is now worth 1/2 the initial value. At year 30, the monthly pension is worth $393.21. So, the annuity provides a steady monthly stream, declining in value. The lumpsum/SWR provides a probable monthly stream, starting at a lower value, and matching the annuity in year 13.
It's a tradeoff, and depends on individual situations and preferences. And inflation could be worse or better, who knows, so some of it is a wild guess.
Wayne