Transfer from LGPS to TPS?

stueyscott

Quick question for those in the know

I have received confirmation of my current benefits from my LGPS - £46500

I now have the option to transfer it to the TPS.

Given that both schemes are similar in terms of benefits and both likely to be going through similar changes in the not to distant future, would it be advisable to leave the existing amount in the LGPS and start fresh with the TPS or consolidate the two?

Mature_Lady_2

You are right to check it all out, I did it the other way around and 'lost' a few years despite being told it was like for like plus the pension age has now changed for new entrants to the TP asI had colleagues who wanted to transfer back.

Loughton_Monkey

Forgive me, but I have no knowledge of the specific schemes to which you refer.

But talking in general terms, imagine I had 30 years entitlement with a Final Salary Scheme with Enployer A. Then I go to Employer B with a similar FS scheme, where I stay for another 10 years.

In round figures, I would get total pension of 30/60ths of my salary 10 years ago - but uprated by RPI (or CPI) for the 10 years. Company B would pay me 10/60th of my actual Final Salary. Hence I am receiving the 'full' 40/60ths of 'salary' but not necessarily 40/60ths of your final salary.

Instead, if Company B gave you 30 years 'back years' by transferring money from Company B, you would get a true 40/60ths of your actual Final Salary.

Now you don't have to be Einstein, then to work out the following:

1. If your actual Final Salary exceeds what your salary was 10 years ago (inflated for 10 years), then you are better off.

2. If your actual Final Salary is lower than what your salary was 10 years ago (inflated for 10 years), then you will be worse off.

Of course all of this is speculation, since I guess you have no firm idea on how your salary is going to move, relative to inflation.

However, if you got a significant pay rise for moving jobs, then Company B is most unlikely to give you a full 30 years (or whatever) earned with Company A. Also, any transfer terms would need to take account of any differences in the scheme benefits. But provided these 'adjustments' were to be done 'fairly' then the above two statements would remain true.

Sadly, you will find it very difficult to arrive at a "precise" answer on what is best. This is because the old scheme will calculate a 'value' based upon a lot of assumptions and some very complex actuarial calculations. Your new scheme will then ask another actuary to perform equally complex calculations, and make assumptions from the perspective of your new scheme. The end product is that you will be quoted X back years, and then be asked to take it or leave it.

Yes, you could go to a third actuary, who at great cost would do complex calculations, make his own assumptions, and decide good, bad, or indifferent. But us mere mortals tend not to be able to do this - especially without detailed knowledge of both schemes.

Faced with this position, personally I would obtain a quote, and work out if I think it passes a test of 'reasonableness'. If so, I would then decide to transfer it (or not) based upon my confidence in getting 'higher than inflation' pay increases for the rest of my career.

Andy_L

Loughton_Monkey wrote: »

However, if you got a significant pay rise for moving jobs, then Company B is most unlikely to give you a full 30 years (or whatever) earned with Company A. Also, any transfer terms would need to take account of any differences in the scheme benefits. But provided these 'adjustments' were to be done 'fairly' then the above two statements would remain true.

As these are both public sector schemes they will, when transfering, ignore any changes in salary - although that cuts both ways. They will also make the same assumptions for calculating the relative benefits so it will. as Loughton says, be a "fair" transfer.
If you're in the old LGPS then, as that is better than the current TPS, your LGPS service will buy more years service in the TPS

DavidHayton

stueyscott wrote: »

Quick question for those in the know

I have received confirmation of my current benefits from my LGPS - £46500

I now have the option to transfer it to the TPS.

Given that both schemes are similar in terms of benefits and both likely to be going through similar changes in the not to distant future, would it be advisable to leave the existing amount in the LGPS and start fresh with the TPS or consolidate the two?

You will need to contact the TPS and ask them how many years you will get for £46500. Only then can you compare the benefits (lump sum? + annual pension) that you would be giving up in the LGPS with the benefits (annual pension) in the current TPS scheme.

Bear in mind that the TPS is still a final-salary schemes, and your salary is likely to rise faster than the indexed uplifting of the pension from the LGPS. Or maybe it won't? You will need to apply your judgment.

Many years ago I transferred three years service from USS into the TPS. Only bought 2 years 303 days (which annoyed me), but I have gained in the end as my salary moved up the pay scale.

Best wishes
David