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  • FIRST POST
    • billpaul812
    • By billpaul812 3rd Oct 17, 10:20 AM
    • 53Posts
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    billpaul812
    Being made redundant
    • #1
    • 3rd Oct 17, 10:20 AM
    Being made redundant 3rd Oct 17 at 10:20 AM
    Hope this is the right forum for this advice request, please advise if not.

    I'm a member of the LGPS and am being made redundant nearly 4 years before my NRA. This leaves me approx 5K short of my projected final pension of £30K, quite a wack. I'm prepared to carry on working but locality is such that I feel its unlikely that I will get a job with access to the LGPS.

    Any advice on what I can do for the best please in terms of maximising post retirement income.

    Thanks.
    BP
Page 1
    • PeacefulWaters
    • By PeacefulWaters 3rd Oct 17, 10:51 AM
    • 7,300 Posts
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    PeacefulWaters
    • #2
    • 3rd Oct 17, 10:51 AM
    • #2
    • 3rd Oct 17, 10:51 AM
    How much redundancy pay will you receive?

    Could you plug this into a private pension, withdraw 25% tax free and drawdown the balance as income until your nearer 60, thus leaving your LGPS pension to grow a little?
    • billpaul812
    • By billpaul812 3rd Oct 17, 11:01 AM
    • 53 Posts
    • 3 Thanks
    billpaul812
    • #3
    • 3rd Oct 17, 11:01 AM
    • #3
    • 3rd Oct 17, 11:01 AM
    I am 62 NRA is 66.
    My redundancy lump sum is £60 odd K, of which £30K is tax free. I've been told the cheque will be north of £50K.

    What is (or how do i find out) what my LGPS pension will grow by without contribution?
    • xylophone
    • By xylophone 3rd Oct 17, 11:07 AM
    • 23,646 Posts
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    xylophone
    • #4
    • 3rd Oct 17, 11:07 AM
    • #4
    • 3rd Oct 17, 11:07 AM
    https://www.kentpensionfund.co.uk/local-government/current-member-paying-in/retirement-in-the-lgps/early-retirement-on-the-grounds-of-redundancy-or-efficiency

    You are aged over 55 and have more than two years membership.

    Does below apply to you?


    Your benefits are payable immediately based on your membership up to the date you leave employment. Your benefits are not reduced for being paid early.

    Your employer may also enhance your benefits at their discretion. Your employer can award you with up to £6,755 extra annual pension. This is a discretion your employer can use if they so wish and they will publicise their policy on this for your information.

    As a current member over age 55, paying into the Scheme, you must take benefits due to you if you are retired early on the grounds of redundancy or business efficiency.
    • billpaul812
    • By billpaul812 3rd Oct 17, 11:16 AM
    • 53 Posts
    • 3 Thanks
    billpaul812
    • #5
    • 3rd Oct 17, 11:16 AM
    • #5
    • 3rd Oct 17, 11:16 AM
    I don't understand this bit. Your benefits are payable immediately based on your membership up to the date you leave employment. Your benefits are not reduced for being paid early.

    My pension estimate shows that if I take it Dec 2017 then it will be around £5K lower than if I take it at my NRA which is about 4 years away.
    • GunJack
    • By GunJack 3rd Oct 17, 11:51 AM
    • 9,882 Posts
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    GunJack
    • #6
    • 3rd Oct 17, 11:51 AM
    • #6
    • 3rd Oct 17, 11:51 AM
    I don't understand this bit. Your benefits are payable immediately based on your membership up to the date you leave employment. Your benefits are not reduced for being paid early.

    My pension estimate shows that if I take it Dec 2017 then it will be around £5K lower than if I take it at my NRA which is about 4 years away.
    Originally posted by billpaul812
    but it will have an annual increase even when in payment...slap your Dec 17 figure into a compound interest calculator, and use, say, 2.5% over the 4 years...how much difference is there then??
    ......Gettin' There, Wherever There is......
    • billpaul812
    • By billpaul812 3rd Oct 17, 12:01 PM
    • 53 Posts
    • 3 Thanks
    billpaul812
    • #7
    • 3rd Oct 17, 12:01 PM
    • #7
    • 3rd Oct 17, 12:01 PM
    "but it will have an annual increase even when in payment...slap your Dec 17 figure into a compound interest calculator, and use, say, 2.5% over the 4 years...how much difference is there then??"

    Forgive me I'm probably being thick here, but during those 4 years my projected NRA figure would have increased too wouldn't it?
    • GunJack
    • By GunJack 3rd Oct 17, 12:25 PM
    • 9,882 Posts
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    GunJack
    • #8
    • 3rd Oct 17, 12:25 PM
    • #8
    • 3rd Oct 17, 12:25 PM
    "but it will have an annual increase even when in payment...slap your Dec 17 figure into a compound interest calculator, and use, say, 2.5% over the 4 years...how much difference is there then??"

    Forgive me I'm probably being thick here, but during those 4 years my projected NRA figure would have increased too wouldn't it?
    Originally posted by billpaul812
    it depends if the figures you have been given at NRA included an estimated increase or not....someone like SilverTabby may be better placed to advised how LGPS does this
    ......Gettin' There, Wherever There is......
    • AlanP
    • By AlanP 3rd Oct 17, 12:26 PM
    • 993 Posts
    • 705 Thanks
    AlanP
    • #9
    • 3rd Oct 17, 12:26 PM
    • #9
    • 3rd Oct 17, 12:26 PM
    What was your LGPS pension value as at 31/03/17 based on your last statement?

    You will get that plus approx 8/12ths of the annual CARE amount you earn each pension year if you go in December 2017, plus a s light increase based on the April 1% payrise possibly.

    This will be less than the anticipated Age 65/66 amount because you will have a few years less CARE pension building up but it won't be reduced for Early Retirement.

    What you could look at doing is paying as much as you can into the LGPS AVC scheme between now and December, including any redundancy over the £30k tax free bit.

    You can then take the whole AVC pot tax free as part of your 25% Pension Commencement Lump Sum at the point you start your LGPS pension.

    You should be able to get the whole redundancy payout into your account tax free that way by the sound of it.
    • woolly_wombat
    • By woolly_wombat 3rd Oct 17, 12:55 PM
    • 502 Posts
    • 304 Thanks
    woolly_wombat
    LGPS redundancy
    I don't understand this bit. Your benefits are payable immediately based on your membership up to the date you leave employment. Your benefits are not reduced for being paid early.

    My pension estimate shows that if I take it Dec 2017 then it will be around £5K lower than if I take it at my NRA which is about 4 years away.
    Originally posted by billpaul812
    No, you are over 55 and therefore eligible for immediate unreduced payment of your LGPS built up to the date of departure.

    AlanP has also demonstrated how to get all your redundancy out tax-free.
    • billpaul812
    • By billpaul812 3rd Oct 17, 2:02 PM
    • 53 Posts
    • 3 Thanks
    billpaul812
    Thank you all but I never understand what you mean by unreduced?
    • GunJack
    • By GunJack 3rd Oct 17, 2:07 PM
    • 9,882 Posts
    • 7,361 Thanks
    GunJack
    Ahhh...think get where you're coming from now....whatever pension you've built up to date won't be actuarily reduced for taking it early (i.e. before NRA) because of the redundancy. If you just decided to leave, and retire before NRA, the pension you'd built up could be taken, but reduced (by 5%-ish per year before NRA) in view that you'd be drawing it for longer than normal.
    ......Gettin' There, Wherever There is......
    • Silvertabby
    • By Silvertabby 3rd Oct 17, 2:09 PM
    • 1,930 Posts
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    Silvertabby
    Unreduced in this context (redundancy over age 55) means that your LGPS pension isn't actuarily reduced for early payment. One way of looking at it is that your NRA will be 62 instead of 66.

    It's a common misunderstanding that 'unreduced' means the pension you expected to get at 66 - but that is is not the case. It just means that you will get the full pension you accrue up to your date of leaving.

    As you are being made redundant, deferring payment of your pension is not an option - but even if it were it would be a daft thing to do as you would be giving money away.
    • billpaul812
    • By billpaul812 3rd Oct 17, 2:19 PM
    • 53 Posts
    • 3 Thanks
    billpaul812
    Thank you both for taking the time to explain that. Its the first time I've ever understood that.
    • billpaul812
    • By billpaul812 3rd Oct 17, 9:12 PM
    • 53 Posts
    • 3 Thanks
    billpaul812
    AlanP said: "What you could look at doing is paying as much as you can into the LGPS AVC scheme between now and December, including any redundancy over the £30k tax free bit.

    You can then take the whole AVC pot tax free as part of your 25% Pension Commencement Lump Sum at the point you start your LGPS pension.

    You should be able to get the whole redundancy payout into your account tax free that way by the sound of it."

    Thank you but I won't be getting any lump sum until quite late in the process. This is early days in terms of my redundancy and technically I haven't even started my notice period yet. I could increase my contributions into my AVC though. I realise its a tax efficient way to save.

    Can you explain in dummy's language why if I did get a lump sum early it would be worth putting the over £30K bit into my AVC?

    Thanks.
    • Audaxer
    • By Audaxer 3rd Oct 17, 9:52 PM
    • 644 Posts
    • 287 Thanks
    Audaxer
    No, you are over 55 and therefore eligible for immediate unreduced payment of your LGPS built up to the date of departure.
    Originally posted by woolly_wombat
    That sounds like a great deal to get it without the actuarial reduction that normally happens when most other pensions are taken early. It should mean that if the pension increases at the projected rate, the OP will still get the amount he would have got at his Normal Retirement Age, as well as getting 4 additional years of early pension without any penalty.
    • hyubh
    • By hyubh 3rd Oct 17, 10:46 PM
    • 1,980 Posts
    • 1,491 Thanks
    hyubh
    That sounds like a great deal to get it without the actuarial reduction that normally happens when most other pensions are taken early. It should mean that if the pension increases at the projected rate, the OP will still get the amount he would have got at his Normal Retirement Age, as well as getting 4 additional years of early pension without any penalty.
    Originally posted by Audaxer
    If you mean 'he would have got at his Normal Retirement Age, had he remained a member until then', well no, as Silvertaby explained (the actuarial reduction is cancelled, however there's no bonus four years of reckonable service).

    This 'deal' is just part of the scheme rules - the employer will be required to pay a capital sum ('strain charge') determined by the fund actuary to prevent the fund (and therefore other participating employers, the local council taxpayer) from losing out.
    • xylophone
    • By xylophone 3rd Oct 17, 10:51 PM
    • 23,646 Posts
    • 13,777 Thanks
    xylophone
    http://moneytothemasses.com/tax-advice/tax-mitigation-tax-advice/how-can-to-reduce-the-tax-on-a-redundancy-payment

    may be worth a look but the Annual Allowance is now £40,000 not £50,000.

    https://mpfmembers.org.uk/content/how-may-i-be-able-use-my-house-avc-fund-retirement

    Take your AVCs as cash
    You can take some or all of your AVC fund as a tax-free cash lump sum*, but you can only take it all as a lump sum if you draw it at the same time as your main LGPS benefits and provided, when added to your LGPS lump sum, it does not exceed 25% of the overall value of your LGPS benefits (including your AVC fund).

    *Provided the lump sum does not exceed £250,000 (2017/18 figure) or if you have previously taken payment of (crystallised) pension benefits, 25% of your remaining lifetime allowance.
    • Audaxer
    • By Audaxer 4th Oct 17, 9:10 AM
    • 644 Posts
    • 287 Thanks
    Audaxer
    If you mean 'he would have got at his Normal Retirement Age, had he remained a member until then', well no, as Silvertaby explained (the actuarial reduction is cancelled, however there's no bonus four years of reckonable service).
    Originally posted by hyubh
    That's true, he would get less as he is not paying into the pension for the next 4 years. However it is still a great pension as he doesn't get any actuarial reduction for retiring early through redundancy. I have 2 pensions - one private sector and one public sector - where that is not the case.
    • AlanP
    • By AlanP 4th Oct 17, 1:55 PM
    • 993 Posts
    • 705 Thanks
    AlanP
    AlanP said: "What you could look at doing is paying as much as you can into the LGPS AVC scheme between now and December, including any redundancy over the £30k tax free bit.

    You can then take the whole AVC pot tax free as part of your 25% Pension Commencement Lump Sum at the point you start your LGPS pension.

    You should be able to get the whole redundancy payout into your account tax free that way by the sound of it."

    Thank you but I won't be getting any lump sum until quite late in the process. This is early days in terms of my redundancy and technically I haven't even started my notice period yet. I could increase my contributions into my AVC though. I realise its a tax efficient way to save.

    Can you explain in dummy's language why if I did get a lump sum early it would be worth putting the over £30K bit into my AVC?

    Thanks.
    Originally posted by billpaul812
    I wasn't implying that you would get the redundancy lump sum early, I mentioned December as it was mentioned in one of the posts.

    You need to ask payroll if they can make a payment of the amount over £30k from the redundancy into the AVC associated with your pension at the point they pay out the redundancy.

    Before that you need to open an AVC (if you don't have one), and if you can afford it start pushing as much into there as you can each month.

    Beware of the Annual Allowance as mentioned below, but unless you have had a large pay rise recently, or contribute to the AVC or another pension already you are likely to be below the thresholds after taking carry-forward into account.

    Your pension statements may show how much the Annual Allowance values for each year were so can check that.

    The only downside is that it is likely to take a bit of time for the last payment into the AVC, which will include some redundancy lump sum, to get to the AVC provider and for them to turn it round and send it back to your employer so they can pay it to you.

    This may delay the first payment of your LGPS pension but you will have the £30k tax free redundancy cash to tide you over.
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