Final Salary - Combining Periods of Membership

janspeed1

Apologies if this is covered elesewhere, but i couldnt find it.

I have 2 periods of membership from a government final salary scheme. (i have since moved ion from both jobs and am not in that scheme)

i have now been offered the option to combine the two periods of membership.

period 1 is a higher salary
period 2 is a slightly lower salary

I really dont understand the pros and cons of combining.

As it's final salary, and my most recent salary was lower, would it put me at a disadvantage to combine?

thanks for any thoughts...

bilbo51

It depends to an extent on when the two periods start and finish.

janspeed1

bilbo51 wrote: »

It depends to an extent on when the two periods start and finish.

first period was about 4 years, second period about 20 months.

they were consecutive.

bilbo51

janspeed1 wrote: »

first period was about 4 years, second period about 20 months.

they were consecutive.

Those are the lengths of the periods but not 'when'. What dates?

Debt_Free_Chick

I think we need to know what you've been offered. You say you can combine both periods of service, so presumably your reckonable service will be 5 years & 8 months? Is that what you've been offered? Applied to your final salary at retirement?

janspeed1

bilbo51 wrote: »

Those are the lengths of the periods but not 'when'. What dates?

sorry i misunderstood, and thanks for the reply...

Period 1 : jan 2006 to mar 2009
Period 2: Mar 2009 - July 2011

janspeed1

Debt_Free_Chick wrote: »

I think we need to know what you've been offered. You say you can combine both periods of service, so presumably your reckonable service will be 5 years & 8 months? Is that what you've been offered? Applied to your final salary at retirement?

tehy havent really "offered" anything.

Simply sent a letter stating "Period 1 final salary = xxx, period 2 salary = xxxx

would you like to combine? If you do not combine you will not be offered this opportunity again"

bilbo51

janspeed1 wrote: »

sorry i misunderstood, and thanks for the reply...

Period 1 : jan 2006 to mar 2009
Period 2: Mar 2009 - July 2011

OK - so the first period includes April 2008 when the system changed from 1/80th plus lump sum based to 1/60th plus NO lump sum based.

Rough calculations based on the LGPS scheme as operated in Greater Manchester
Period 1
Jan 2006 - Mar 2008 = 2 years and 3 months service (2.25 years)
Apr 2008 - Mar 2009 = 1 years service

So the pension deriving from this service is

Salary*(2.25/80+( 1/60)) = 4.47% of that salary

plus a lump sum of 3*(2.25/80)* that salary

So if your salary here was £10,000 per annum, the pension would be £447 per annum and the lump sum would be £968.75.


Period 2
March 2009 - July 2011 = 2 years and 4 months service (2.33 years)

So the pension deriving from this service is

Salary*2.33/60 = 3.88% of that salary.

No lump sum from this service (the LGPS rules changed in April 2008.)

So if your salary here was £10,000 per annum, the pension would be £388 per annum.

In total then you would have a pension of £835 (which will rise in line with inflation until you take it (RPI, I think but not sure)) and a lump sum of £968 which I don't know if it's inflation proofed in any way...

[EDIT] actually the pension should be a little higher than that because the first period pension has a couple more years to grow than the second one.[/EDIT]

You'll have to plug your own real final salaries into those calculations of course.

So the question is - what will the terms be if you combine them into one? And you've got to ask the scheme administrator that. If it's better than what you've got, then I would go for it. If not, then I wouldn't.

Bigmoney2

Is the lower salary due to taking a lower graded role or because you have reduced your hours?

If the later it shouldn't make a difference as final salary pensions are calculated on the full time equvalent salary, the reduced hours effect the number of years service accrued.

janspeed1

thanks for your replies guys. really appreciate it.