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    • vart400
    • By vart400 19th May 17, 9:46 PM
    • 84Posts
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    vart400
    Auto-enrolled in workplace pension percentage question
    • #1
    • 19th May 17, 9:46 PM
    Auto-enrolled in workplace pension percentage question 19th May 17 at 9:46 PM
    I've been auto-enrolled in the workplace pension. After originally thinking about cancelling in I came to my senses and will continue paying in. I'm 33, work in the public sector and this is my 1st pension.

    However the percentage that I'm paying in seems a far bit higher than the minimum. On my payslip it says "LGPS Office (5.80%)". It came as a bit of a shock as I was expecting something like 3-4%. Could it be that my employer is putting it high so that people will cancel? How do I go about lowering the % and would you recommend it?

    Sorry for all the probably silly questions. I didn't receive any paperwork explaining how all this works, only a general works email explaining who to contact to cancel.
Page 1
    • AnotherJoe
    • By AnotherJoe 19th May 17, 10:05 PM
    • 7,595 Posts
    • 8,195 Thanks
    AnotherJoe
    • #2
    • 19th May 17, 10:05 PM
    • #2
    • 19th May 17, 10:05 PM
    It will be a statutory amount, not one conspiratorially set to make people unsubscribe (except the financially clueless). I very much doubt you can lower it and even if you could I'd strongly recommend you dont.

    To put it in context, at just under 6%, the benefits you get will be worth what you'd need to put 2x or even 3x that percentage into a private pension, eg if you worked for Acme Ltd, you might need to put 15% in to get the same. Plus its guaranteed, which a private pension isn't.

    FWIW, "the minimum" by which I take it you mean what people enrolled in private employers schemes like Nest and so on pay at present , 1%, is a pathetic amount that will pay a pathetic pension when those people retire. There's no mystery, the more you save the more you get.
    • greenglide
    • By greenglide 19th May 17, 11:20 PM
    • 2,897 Posts
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    greenglide
    • #3
    • 19th May 17, 11:20 PM
    • #3
    • 19th May 17, 11:20 PM
    So you work in local government and are in the LGPS?

    LGPS is a "proper" pension scheme which pays out proper pensions, even if it isn't as good as it used to be.

    It is not an "auto enrollement" scheme, the employer pays vastly more than the 1% that an auto enrollment scheme would have them paying.

    You will get tax relief on the contributions so you won't pay the full amount.

    If you should decide to opt out you will also lose other valuable benefits as well.
    • vart400
    • By vart400 19th May 17, 11:44 PM
    • 84 Posts
    • 142 Thanks
    vart400
    • #4
    • 19th May 17, 11:44 PM
    • #4
    • 19th May 17, 11:44 PM
    Thanks for the replies. I didn't realise it was a 'proper' pension. The email said "auto enrolled" so I just assumed it was that. On my payslip it has my employers (secondary school) contributions and its 2.5x what I put in.
    • PeacefulWaters
    • By PeacefulWaters 20th May 17, 6:16 AM
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    PeacefulWaters
    • #5
    • 20th May 17, 6:16 AM
    • #5
    • 20th May 17, 6:16 AM
    Thanks for the replies. I didn't realise it was a 'proper' pension. The email said "auto enrolled" so I just assumed it was that. On my payslip it has my employers (secondary school) contributions and its 2.5x what I put in.
    Originally posted by vart400


    Will they match at the same rate if you put even more in?
    • xylophone
    • By xylophone 20th May 17, 7:23 AM
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    xylophone
    • #6
    • 20th May 17, 7:23 AM
    • #6
    • 20th May 17, 7:23 AM
    https://www.eversheds-sutherland.com/documents/services/employment/auto-enrol-lgps-employers-admission-bodies.pdf

    http://www.lgpslibrary.org/assets/gas/uk/AEBv6.1c.pdf
    • bigadaj
    • By bigadaj 20th May 17, 7:24 AM
    • 10,701 Posts
    • 6,990 Thanks
    bigadaj
    • #7
    • 20th May 17, 7:24 AM
    • #7
    • 20th May 17, 7:24 AM
    Thanks for the replies. I didn't realise it was a 'proper' pension. The email said "auto enrolled" so I just assumed it was that. On my payslip it has my employers (secondary school) contributions and its 2.5x what I put in.
    Originally posted by vart400
    So for less than 6% contribution you're getting an employer contribution of over 14%, not many opportunities to do better than that in any pension scheme. And that's only an estimate as they are guaranteeing you a future benefit pretty much fixed in stone, many would argue their contribution might be worth closer to 20% in objective assessment.
    • johndough
    • By johndough 20th May 17, 8:58 AM
    • 651 Posts
    • 250 Thanks
    johndough
    • #8
    • 20th May 17, 8:58 AM
    • #8
    • 20th May 17, 8:58 AM
    Hi

    I probably shouldn't say this...

    LGPS is now Auto-Enrollment (a good thing unless you administrate the nightmare).

    There is a 50/50 option (not really a good thing) but better than nothing.

    The 5.8% is set and with tax relief is perhaps more like 4.7%.

    AAND it's "free money" when you retire, along with 'death benefits' 'ill-health cover' and a coupla other things.

    You get roughly 2% of your pay as a pension when you retire for each year you pay in.

    1 year you pay in £1160 gross (£930 nett) of £20K. 2% is £400, so you may think that after 3 years of pension payout it's free money (and it almost certainly is).

    IF the payout term is a minimum of 10 years then you get £4000 guaranteed, which beats any kind of savings plan I know about.

    OH yeah and the money you and the employer put in is invested 'til the day it's wanted, which is a third lot of money to fund this EXCELLENT scheme, in my very biased view.
    • Seanymph
    • By Seanymph 25th May 17, 8:00 AM
    • 2,627 Posts
    • 17,111 Thanks
    Seanymph
    • #9
    • 25th May 17, 8:00 AM
    • #9
    • 25th May 17, 8:00 AM
    The rate is based upon your salary bracket by LGPS and is not optional, so cannot be changed.

    I pay the same rate as you, and am not at work, so can't be specific but that's up to around 21k salary then it goes up for the next bracket. If you want the actual figures drop me a pm and I can send them to you.

    The employers contribution is also set annually, and rises every year - currently I think it's 21%, or 21.5%. Again, I have the figures at work.

    For that you get 1/49th of your average salary over your working time per year you pay in once you retire.

    Its a set sum (and changed in 2014, so those in prior to that have a different amount).

    You can increase your amount in two ways, you can 'buy' an additional annual sum to go on top of your end benefit - either by choosing the sum, or the overpayment. Or, you can pay Additional Voluntary Contributions that go into a different pension (think it's Legal and General).

    Strikes me that it's a good pension - you know what you will get, the employer pays in a lot, and currently I am buying another £500 a year by choice.

    Your employer will have someone who knows about as much as me (I just administer the scheme) - and the LGPS will happily answer any questions if you contact them directly.

    There is also a log in available for you on their website (which is easy to use) so you can see what your pension is doing.
    • hyubh
    • By hyubh 25th May 17, 8:32 AM
    • 1,946 Posts
    • 1,456 Thanks
    hyubh
    Thanks for the replies. I didn't realise it was a 'proper' pension. The email said "auto enrolled" so I just assumed it was that.
    Originally posted by vart400
    As johndough says, the LGPS is an 'Auto-Enrolment pension' in the sense it fulfils the legal requirements for Auto-Enrolment (when AE came in, the scheme rules had to be adjusted slightly to fully comply, even though it already operated its own form of 'auto-enrolment'). However, when most people speak of an 'Auto-Enrolment pension', they typically mean one of the newer, 'Defined Contribution' (DC) schemes specially set up for employers who never offered a pension scheme before (or who did, but only enrolled a subset of their staff), and pretty much only wish to do the minimum necessary. In contrast, your LGPS pension is a 'Defined Benefit' (DB) scheme that goes way, way beyond the legal minimum.

    On my payslip it has my employers (secondary school) contributions and its 2.5x what I put in.
    The employer rate is somewhat arbitrary to the extent it depends on the funding approach of the 'administering authority' (typically a big local council) who runs the pension fund, as advised by the fund actuary, and nature of the employer. E.g., if at some point the function you work in came to be outsourced and you transferred to a private sector employer, under current law that employer would have to join your existing LGPS fund to protect existing members' pension rights. However, they would probably enjoy a higher contribution rate for their pains because they wouldn't have the backing from central government that the school does (in the jargon, their 'employer covenant' would be weaker, making them a greater risk to the pension fund and needing to pay higher contributions to reduce that risk). In a DC scheme, in contrast, there's none of this as the employer's responsibility for the future pension is pretty much extinguished once they have paid the initial contributions.

    However the percentage that I'm paying in seems a far bit higher than the minimum. On my payslip it says "LGPS Office (5.80%)". It came as a bit of a shock as I was expecting something like 3-4%.
    Originally posted by vart400
    Relative to the pension earned, the 5.8% is actually artificially low due to the fact the scheme bands employee rates by annual pay, which given the benefit basis (career average) makes things proportionally cheaper for lower-paid members at the expense of higher-paid ones.

    Could it be that my employer is putting it high so that people will cancel?
    As others have said, the employer in a multi-employer DB scheme like the LGPS has no say in the matter.
    Last edited by hyubh; 25-05-2017 at 8:41 AM.
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