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    • Malchester
    • By Malchester 11th Sep 17, 8:03 AM
    • 45Posts
    • 20Thanks
    Malchester
    LGPS Deferred
    • #1
    • 11th Sep 17, 8:03 AM
    LGPS Deferred 11th Sep 17 at 8:03 AM
    I have an LGPS deferred pension that starts paying in a few months when I am 60. I have asked the question of them whether I can delay receiving the pension as I am not in need of the money but they have said a firm 'No' - I am one of the 'very small number' of people in the scheme who have a protected pension age of 60 and, as such, will receive my maximum pension for the years worked without any reductions at the age of 60, no choice.

    My question is, is there a 'simple' way to work out what the best option is for the level of tax free lump sum to take (up to the 25% maximum tax free allowance). In my deferred pension statement there have always been two options - a lower figure and a larger on, but I could take an amount in between.

    Any help would be apprecited
Page 1
    • chiefie
    • By chiefie 11th Sep 17, 8:13 AM
    • 308 Posts
    • 318 Thanks
    chiefie
    • #2
    • 11th Sep 17, 8:13 AM
    • #2
    • 11th Sep 17, 8:13 AM
    I believe lgps comes with a 12:1 commutation which at 60 would seem extremely ooor value.

    If you were a member before 2008 you already have lump sum payable at 3/80ths.
    • Silvertabby
    • By Silvertabby 11th Sep 17, 2:07 PM
    • 1,794 Posts
    • 2,213 Thanks
    Silvertabby
    • #3
    • 11th Sep 17, 2:07 PM
    • #3
    • 11th Sep 17, 2:07 PM
    https://www.lgpsmember.org/more/lump-sum-calculator.php

    May be of help.
    • Malchester
    • By Malchester 11th Sep 17, 5:04 PM
    • 45 Posts
    • 20 Thanks
    Malchester
    • #4
    • 11th Sep 17, 5:04 PM
    • #4
    • 11th Sep 17, 5:04 PM
    Thanks Chiefi. I left local government in 1994 after c11 years service and contributions. I think a 12:1 commutation is right and I have an automatic lump sum figure but can increase that to the maximum allowed tax free. It is a question of working out whether the extra tax payable on the higher annual pension with lower lump sum is better than lower pension and highe tax free lump sum
    • bigadaj
    • By bigadaj 11th Sep 17, 7:53 PM
    • 10,693 Posts
    • 6,984 Thanks
    bigadaj
    • #5
    • 11th Sep 17, 7:53 PM
    • #5
    • 11th Sep 17, 7:53 PM
    Thanks Chiefi. I left local government in 1994 after c11 years service and contributions. I think a 12:1 commutation is right and I have an automatic lump sum figure but can increase that to the maximum allowed tax free. It is a question of working out whether the extra tax payable on the higher annual pension with lower lump sum is better than lower pension and highe tax free lump sum
    Originally posted by Malchester
    One way of viewing it is the reverse commutation gives you the return you'd need from the lump sum you get to get the same income.

    So you'd need 8.5% return with inflation increases. The fact that you're getting this money tax free reduces the expected return, as the pension would be subject to tax. But you'd still be struggling to find an index linked investment that gets a guaranteed return at that level,.

    If you have a desperate reason why you need a lump sum immediately then it may work for you but normally it's not advisable.
    • hyubh
    • By hyubh 11th Sep 17, 9:33 PM
    • 1,942 Posts
    • 1,454 Thanks
    hyubh
    • #6
    • 11th Sep 17, 9:33 PM
    • #6
    • 11th Sep 17, 9:33 PM
    I have an LGPS deferred pension that starts paying in a few months when I am 60. I have asked the question of them whether I can delay receiving the pension as I am not in need of the money but they have said a firm 'No'
    Originally posted by Malchester
    More exactly, no point, as you won't get an extra special bigger pension later - that only kicks in if you left taking the pension until after age 65, and even then you wouldn't be recovering the unpaid pension from 60 to 65.

    My question is, is there a 'simple' way to work out what the best option is for the level of tax free lump sum to take
    Easy-peasy, if you don't have lifetime allowance or other special issues, take the default lump sum and don't commute any more - not because commuting is bad per se, but because the commutation rate applicable in public sector schemes isn't intended to be actuarially neutral.
    • kidmugsy
    • By kidmugsy 11th Sep 17, 11:29 PM
    • 9,847 Posts
    • 6,639 Thanks
    kidmugsy
    • #7
    • 11th Sep 17, 11:29 PM
    • #7
    • 11th Sep 17, 11:29 PM
    I have an LGPS deferred pension that starts paying in a few months when I am 60. I have asked the question of them whether I can delay receiving the pension as I am not in need of the money
    Originally posted by Malchester
    If the money is an embarrassment - e.g. if it pushes you into the higher rate tax band - you could always consider making contributions to a personal pension to avoid the problem. Or gift it to a charity, if you happen to know of one which seems not to be corrupt.
    • Silvertabby
    • By Silvertabby 12th Sep 17, 1:26 PM
    • 1,794 Posts
    • 2,213 Thanks
    Silvertabby
    • #8
    • 12th Sep 17, 1:26 PM
    • #8
    • 12th Sep 17, 1:26 PM
    You don't have to take this money now - your LGPS needs your option choices and bank details in order to make payment....

    However, it wouldn't be in your best interests to defer payment now as it won't increase in value in deferment before normal retirement age. You'd be losing money. (Ok, slight uplift from 65 - but would never compensate for the loss of 5 years of pension payments)

    I've dealt with this question before "I don't want it now because I'll have to pay 40% tax on it". My answer to that was "take it now and lose 40%. Don't take it and lose 100% ".

    Doesn't appear to be the case here, but the LGPS are aware that some people won't take payment of their LGPS pensions because they would lose their means tested benefits.
    Last edited by Silvertabby; 12-09-2017 at 2:58 PM.
    • Malchester
    • By Malchester 12th Sep 17, 3:20 PM
    • 45 Posts
    • 20 Thanks
    Malchester
    • #9
    • 12th Sep 17, 3:20 PM
    • #9
    • 12th Sep 17, 3:20 PM
    Thanks Silvertabby. I have been in touch with the LGPS (WYPF) on a couple of occasions asking whether it was possible for me not to take my pension when I reach 60 and wait until my state retirement age. However they have been insistent that I must take any lump sum and pension when I reach 60 - no choice about it. I understand what you are saying about delaying taking the pension as I would lose out the five plus years of payments so that would be silly. My query really was how to balance the level of lump sum to take (up to the maximum 25% tax free)
    • Silvertabby
    • By Silvertabby 12th Sep 17, 4:14 PM
    • 1,794 Posts
    • 2,213 Thanks
    Silvertabby
    Have you tried the calculator I gave you in post No 3?

    You're are likely to have some pre 2008 benefits, and so an automatic lump sum. It sounds like you have been given the minimum/maximum lump sum options, but the calculator lets you choose an in-between option.

    There's no right or wrong answer re taking the maximum lump sum - it's what works for you.
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