How much can I get tax free?
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Savvy_Sue
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Apologies if I am being a numpty, but I have just received my deferred benefit statement for my ancient and tiny Local Gov pension scheme.
I can start drawing it from next year, and as the amounts are so small as to be hardly noticed I am seriously considering doing that, although I intend to keep working.
It's this paragraph that I can't quite get my head around.
If someone could give me a rough estimate of what my annual pension would then be if I did take the extra lump sum, that would be helpful ...
As it happens, a small lump sum next year could be handy.
And as a supplementary, I can't see anywhere what would happen if I decided NOT to start drawing this pension, presumably it just stays in the pot and keeps growing?
I can start drawing it from next year, and as the amounts are so small as to be hardly noticed I am seriously considering doing that, although I intend to keep working.
It's this paragraph that I can't quite get my head around.
Increasing your tax-free lump sum at retirement
When you retire you will be given the option to convert up to 25% of your total pension scheme benefits to a lump sum. This means that you can choose to receive a larger tax-free lump sum and smaller pension than the standard benefits. The conversion rate is currently £12 of lump sum (tax-free) for every £1 of pension given up.
For example, if my annual pension value is going to be £1500, and my automatic tax-free lump sum is £4500, what does that make my 'total' pension scheme benefits?When you retire you will be given the option to convert up to 25% of your total pension scheme benefits to a lump sum. This means that you can choose to receive a larger tax-free lump sum and smaller pension than the standard benefits. The conversion rate is currently £12 of lump sum (tax-free) for every £1 of pension given up.
If someone could give me a rough estimate of what my annual pension would then be if I did take the extra lump sum, that would be helpful ...
As it happens, a small lump sum next year could be handy.
And as a supplementary, I can't see anywhere what would happen if I decided NOT to start drawing this pension, presumably it just stays in the pot and keeps growing?
Signature removed for peace of mind
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Comments
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How old are you and what is your scheme age?
If you are still working, what kind of pension are you paying into now?0 -
I'm 59, and when I took this out the expected retirement date for the fairer sex was 60. Got to wait until I'm 66 for my SRP.How old are you and what is your scheme age?
Currently stakeholder. That one's not enormous either, but DH has good ones.If you are still working, what kind of pension are you paying into now?
Work is likely to change pension scheme next year or the year after when Auto-Enrolment strikes! Current scheme is not AE compliant, not sure who we'll be going with but likely to be Now:Pensions or People's Pension (small employer, obviously).Signature removed for peace of mind0 -
Have you obtained a new state pension statement?
In which years were you working in Local Government?
http://www.lgps.org.uk/lge/core/page.do?pageId=100791
You have the right to draw your LGPS pension at 60?
You earned a GMP?
Commutation on a 12:1 basis means that you would receive £12 for every £1 of pension you gave up - this is normally considered to be pretty dire - by way of example, a relative of mine received £20+ some few years ago.
Is there an automatic lump sum in your section of the scheme?
As for choosing to defer drawing your deferred pension, do the scheme rules permit this for a deferred pensioner?
Hyubh is the expert on this scheme and it might be worth a pm.
It might also be worth giving the administrator a ring to check on your exact situation.0 -
If you left before 31/03/1998 and it is payable in fullfrom age 60, then you cannot defer your pension.
If you left after 01/04/1998 then you can defer it, but if its payable in full from 60 there is no point as the pension increases by CPI whether in deferment or in payment and late retirement enhancements dont take effect until age 65.
If your pension is £1500 and lump sum £4500 then your maximum lump sum would be around £8000 and residual pension £12000 -
LGPS is (I think) the only sizeable scheme for government employees that is still allowed to let member transfer out. You could ask for a CETV quotation, and then consider whether that interests you. But if you are going to be rather short of pension income, taking a CETV might be a poor idea.Free the dunston one next time too.0
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You can transfer out of the LGPS, if the transfer value is over £30k you would need financial advice.
And if 60 is NRD and the member is 59, then they cant transfer out within a year of NRD0 -
I'm 59, and when I took this out the expected retirement date for the fairer sex was 60.
On that narrow point, normal retirement ages in the LGPS have always been the same for men and women; if yours is less than 65, then you have benefited from the 'rule of 85' (alias '85 year rule') [or have transferred from the civil service with a protected NPA many years ago... though from what you say that's unlikely]. Whatever it is should be on your annual benefit statement however - does it say 60? I ask because there's a chance you're confusing the age at which you can draw the pension with reductions (which will be 60) with your normal retirement age.
Other than that, what Drp8713 said...0 -
I am not sure of the exact years, because it is all so long ago. However, I think it would have been from 1981, and definitely finished in April 1987. So ...In which years were you working in Local Government?
http://www.lgps.org.uk/lge/core/page.do?pageId=100791
Yes, I can definitely draw it at age 60. Every letter I've ever had from them has said as much.You have the right to draw your LGPS pension at 60?
A what? All it ever says is the annual pension, and the automatic tax-free lump sum. Ah, a Guaranteed Minimum Pension. No idea. That's never mentioned, but I suspect it's what they mean by my 'annual pension'.You earned a GMP?
Yes, as I said, it's about £4500. Which will be paid to DH if I pop my clogs before my next birthday. Not worth bumping me off for.Is there an automatic lump sum in your section of the scheme?
Do you know, it never occurred to me that wouldn't be possible, but it does explain why that option is never mentioned! Gosh, I can be a pensioner next year! :jAs for choosing to defer drawing your deferred pension, do the scheme rules permit this for a deferred pensioner?
Thanks for those suggestions. I had thought of ringing them, but never when a) I have the letter with me and b) during working hours ...Hyubh is the expert on this scheme and it might be worth a pm.
It might also be worth giving the administrator a ring to check on your exact situation.
Aha! Just seen I can email them!
Thanks, that's my situation. I think.If you left before 31/03/1998 and it is payable in fullfrom age 60, then you cannot defer your pension.
Thank you, that's what I needed to know.If your pension is £1500 and lump sum £4500 then your maximum lump sum would be around £8000 and residual pension £1200
Thanks, that would be something I'd take advice on.LGPS is (I think) the only sizeable scheme for government employees that is still allowed to let member transfer out. You could ask for a CETV quotation, and then consider whether that interests you. But if you are going to be rather short of pension income, taking a CETV might be a poor idea.
I'd seen that, but my value is well below.You can transfer out of the LGPS, if the transfer value is over £30k you would need financial advice.
So I'd be too late anyway.And if 60 is NRD and the member is 59, then they cant transfer out within a year of NRD
I am going away to read the letter properly again ...On that narrow point, normal retirement ages in the LGPS have always been the same for men and women; if yours is less than 65, then you have benefited from the 'rule of 85' (alias '85 year rule') [or have transferred from the civil service with a protected NPA many years ago... though from what you say that's unlikely]. Whatever it is should be on your annual benefit statement however - does it say 60? I ask because there's a chance you're confusing the age at which you can draw the pension with reductions (which will be 60) with your normal retirement age.
Other than that, what Drp8713 said...Signature removed for peace of mind0 -
Right, I have read it all again, carefully.
There is definitely a bit which says:
Your benefits are due for payment on an unreduced basis from [my birthday next year].
I do realise I could probably do with some 'proper' advice, but I find it helps to have my head around the basics first.Signature removed for peace of mind0 -
I'd seen that, but my value is well below
Its the CETV not the pension value used, and yours would be over £30k.
But based on what you have said, as youre within a year of NRD they shouldnt let you transfer out.0
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