Opting out of pension
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As a deferred LGPS member about to take my pension next year at the age of 60 I would urge you to stay in it. It may seem to be a sacrifice at the moment, wanting to save money for other things in life but not being able to do so because of what seems to be a large pension contribution. Remember that you are just 21, in years to come you will be earning more than you are now as your career progresses and spare money will become available. Whilst I only worked in local government for 11 years, it is generally true that as your income increases you will have more choice about what to do with it - put more into pension, spend more, live life more. It may seem a better option now to withdraw from the pension but I can assure you that it would be very silly looking for your future0
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Always best to stay in the pension scheme. If you are struggling on your current salary then, I can easily see the contributions that would have gone into your pension being spent rather than saved. Have you looked at your budget and places you could cut back, have you looked at better deals on bills etc 1st0
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I joined the LGPS relatively late but am well aware that the pension is 'gold dust'. One of my colleagues has been working in the same Dept for about 35 years - she is a moany old so-and-so, but is in the envious position of being able to retire next year at the age of 55, all because she has built up an extremely good LGPS pension. Obviously her pension will be reduced for retiring early, but she has a history of ill health and wants to be able to leave the tedium of work and do the things she enjoys. My point is - like everyone else - I would urge you not to opt out of the LGPS pension - just stick with it and you will certainly appreciate having the option to retire early if you want to.0
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To answer this question and the related ones: yes, you can take your LGPS pension at any age from 58, in a variety of different ways.kmb500 wrote:You can take your pension earlier than the retirement age? I thought you have to wait until you're 68 / retirement age ?
1) You can take the LGPS pension early, although it will be reduced to take into account the fact that it will be paid for longer. Usually bad value (the whole scheme is run on the assumption that you retire on a certain date, and if you don't, the actuary gets out a calculator and a pair of shears), but the option's there.
2) You can exchange the guaranteed benefits for a cash value and transfer the LGPS into a personal pension - if you have been in the scheme for any length of time the transfer value will be well over six figures - and then draw on it like any other personal pension at any age from 58. It's usually bad value, very high risk and considered a con 9 times out of 10, but again the option's there.
3) Now the really good value option - if you have an LGPS pension coming up and other savings, you can retire early and spend your other savings knowing that the LGPS pension will kick in once you've spent them.
For example if you're 63 and have £100,000 put by and a £20,000pa pension coming from the LGPS + State Pension, you can retire five years early knowing that with zero risk you can spend £20,000 a year and when it's gone, the LGPS will replace it. If you don't have the LGPS, that £100,000 will have to last you your entire lifetime. Which by the usual rule of thumb means you can only spend £4,000 a year without running out - nowhere near enough to retire early.
It may seem a bit remote to talk of having £100,000 in savings in your 60s when you're struggling to afford your LGPS contributions today, but things change. The reason I listed all those options is to illustrate that you are not in any way tied in to retiring at 68.
This is the nice thing about having money, it gives you options. If you spend all your money on ciggies and eventually flop out at 68 with only your State Pension to live on, then you still have options, but they are of the less exciting "shall I turn the heating on or eat lunch today" variety.0 -
Do your future self a massive favour and stay in the scheme!!!
Forget the £85 a month, you've never had it, you don't really need it. Do an SOA and see where you can cut back in other areas instead.
I have paid into various versions of the LGPS over the years and I have done reasonably well at work which has boosted my pension. I've also had two maternity leaves and worked various part time hours over the years. I have 'banked' an indexed linked pension of £12k at 60 in today's money already. We are on track to retire at 55 mostly thanks to my LGPS. But there is one decision I made that I really do regret...
At 18 I was bright enough to know I needed a pension and so I started saving into a private pension. At 19 I joined the council but I wasn't bright enough to realise just how good the LGPS was at the time...I was 22 years old when I eventually clicked on. Now I am 42 and still fortunate enough to be paying into the LGPS, but I regularly kick myself for missing those first two and a half years. I reckon that mistake has cost me around £1,500 in lost pension income. The decision to not join the LGPS is probably the most stupid financial decision I've ever made.
So stay in the scheme...0 -
I live in an expensive area, since moving out from my parents and privately renting I have been really tight on money, it would just give me a bit more breathing room.Dorian1958 wrote: »Could you live on £8000 p.a. in today's money because if you cannot live on it now, you won't be able to survive on just the state pension when you qualify for it. Don't see the point in opting out just to put it in the bank, when you say you could really do with it now, what real difference would £84 per month make? Do you need it to eat, heat your home? Or is it just for maintaining a social life? Don't do it, it may take a few years but one day you will be angry with yourself.
I haven't made my mind up, I don't fully understand how the pension scheme works so really just want more info and advice. I'm being tempted by the extra money as right now it would help me, and am wanting people to convince me to keep with the sensible option.sammyjammy wrote: »I'm not really clear on why you're asking for advice, it seems you've clearly made up your mind.
Chances are if you opt out you'll never go back in as you'll never want to make that contribution again, particularly if in 20 years time you earning twice the money and your contribution is £200 a month and you've got two kids!
Yeah, I would like to earn more money and when a more senior position comes up I will be applying for it, although I am pleased with my current salary for what it is, since I have nothing except some GCSEs to my name, I'm happy to be earning 22K at 21. If I was earning more money I'd be able to put more aside, but as it stands in the short term I think the extra money from opting out would help.The current rule is that you can take a pension from the age of 55. I have seen a suggestion that that will become 10 years before the state retirement age.
I know that at your age even 55 seems a long way off. My first job only allowed managers to join the company scheme. But when I was 25 I lucked into a good scheme, though its rules don't let me take it until I am 60. I now wish I had put more into it.
Your scheme is better and safer than mine. You were talking about saving the money not spending it, but you are not going to find any better investment.
Since you were thinking about saving it it seems you are considering the future, Do you have a plan for what you want to do with your life? I only had short term ones at your age, but I did not intend to stay at the same level in my first job for a long time. If you can get promotions and increase your pay that solves everything - more to spend, more to save and more pension. Is there any reason that could not be your short term goal?
I don't have any big aspirations in life, just want to be able to get by, some time in the next decade would like to have a partner and kids get a house etc. but I can't save up for a holiday at the moment let alone a deposit on a mortgage.
Yeah, I don't currently feel like I'm paying the pension; I've been paying in since I started the job so it's never felt like it is taking away from my earnings. Same with tax, it's just there and I don't feel like I'm paying it. But now that I have found out I am allowed to opt out, the extra money per month is very appealing to me.Once you start paying it you tend to forget its going out so you really dont feel it. I AM pensioner and i am so glad i stayed in my pension scheme. I can see so much poverty in lots of the elderly and its avoidable.
You are also saying No Thanks to free money, Thousands and thousands of £s. You would be mad to leave it
Thanks. Yeah, I'm going to arrange to see someone in HR to discuss it.To kmb500 - along with the bl00dy good advice you've already had on this thread, go and find someone in work who really understands the pension scheme, book some time with them and get them to explain it to you...properly, mind, AND PUT IN THE EFFORT TO FULLY UNDERSTAND HOW GOOD IT IS.
You say death In-Service, Ill-health early retirement benefit, surviving spouse/partner benefits mean nothing to you currently, and maybe they don't. You may meet someone next week/month/year and suddenly they mean a lot, in both financial and security terms, to you both.
In some ways, I get where you're coming from about the dosh being more use to you now, but it really IS a flawed argument....being in the pension scheme now and for the following 40-ish years is FAR better than pishing £84 more up the wall every month.....
thanks for your comment. I suppose my outlook is that the idea of being an unhappy pensioner doesn't bother me; I care more about making the most of my life now even if that is detrimental to me when I'm old. Maybe that's silly.kmb I sympathise-you can see exactly what that £80 odd would buy you here now today, but here's my story in the hope it helps. Longish post, sorry 😐
In my early-mid 20s I was in your position and declined the offer to join LGPS because I thought I couldn't afford it. At the time I had kids and a mortgage and bills and and and and... Mortgages were easy to come by then, see how times change
At 30 I was a bit further up the tree and started paying in.
In my mid fifties now (yes I know that's more than twice your age but time speeds up as you get older, really it does) and too many of my waking hours are spent obsessing about how to move out of local government and into something more creative. I've reached the point where I've seen and done most of the shiny new exciting stuff and it's just more of the same with 70% fewer people to do it.
I can access my pension now whenever I choose to, with reductions for taking it early. I've been lucky in my job, worked my way up and even - mostly - enjoyed what I've done, and if I'd joined LGPS on day 1 I could afford to walk away now, and know I could afford to do most things I want to while I'm still relatively young (don't laugh, I know 55 is a mile off when you're 21 but I compare myself with proper pensioners with sticks and wheelchairs these days 😉). I didn't, so I can't. Not. Quite.Yet. You wouldn't believe how overwhelmingly frustrating that is. It won't be long before I crack and leave anyway but I'll either have to find other work or cut out many of the things I really want to do. I have limited my options now because I didn't scrimp a bit more (we were pretty poor believe me) back then.
I really envy you and my kids for the chance you've got to make better choices than I did. Can I encourage you to do some reading about people who have made plans to free themselves from the world of work early. FIRE is a useful search term. It might not be for you - maybe you'll find you enjoy being a wage slave too much to give it up before you're 70 but give yourself the option. You've got a huge opportunity to get this right. Good luck 😉0 -
All those posts and you're still thinking of opting out?
If you do, it will be the most stupid decision you ever make.0 -
There are always excuses you can use for not opting in. The problem is that they are just excuses and not reasons.
You may as well add "dog ate my homework" to the list of excuses you have given so far as they are all comparable to that.I suppose my outlook is that the idea of being an unhappy pensioner doesn't bother me; I care more about making the most of my life now even if that is detrimental to me when I'm old. Maybe that's silly.
Planning to spend around 20-25 years living on the breadline all the for sake of a tiny amount of £84 amount is not just silly. It is plain ridiculous.
To be honest, I am flabbergasted. So much so, that I am beginning to think that this whole scenario is not real and you are trolling.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
I would use a much stronger word than "silly"! I just turned 60. When I was your age I was playing in a punk band pursuing a career in the music industry. I had the same attitude as you. You will not believe how quickly that 21 year old will become a 60 year old. 60 year old me looks back at 21 year old me and says "boy, you made some stupid mistakes". If I had done a few things a bit differently back then I would be in a much better position now.thanks for your comment. I suppose my outlook is that the idea of being an unhappy pensioner doesn't bother me; I care more about making the most of my life now even if that is detrimental to me when I'm old. Maybe that's silly.
You have the privilege of being in one of the best pension schemes there is. Saving into that now will make a massive difference when you are older. Please do what everyone on here is advising you and keep paying in to the pension. I really urge you to do that.
If you want a bit of extra money, give up smoking. It's a stupid habit and it's damaging your health. Don't give up drinking and going out though :beer:
Back in 1965, Roger Daltrey sang "Hope I die before I get old". Well, look at him now.......0 -
.......OldMusicGuy wrote: »Don't give up drinking and going out though :beer:
Back in 1965, Roger Daltrey sang "Hope I die before I get old". Well, look at him now.......
Who0
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