Lgps

Assistant

Hi can anyone explain LGPS to me please?

I work 37 hours each week. I an paid for 44 weeks a year.
I have been paying into this scheme for 6 years.

I will retire in 20 years.

Do i need to make AVC ?

Lets say my annual income is 20k

Is it possible for anyone to work out what I may receive per month when I retire? Or am I asking a silly question?

Thank you

moneyfoolish

Assistant wrote: »

Hi can anyone explain LGPS to me please?

I work 37 hours each week. I an paid for 44 weeks a year.
I have been paying into this scheme for 6 years.

I will retire in 20 years.

Do i need to make AVC ?

Lets say my annual income is 20k

Is it possible for anyone to work out what I may receive per month when I retire? Or am I asking a silly question?

Thank you

If your type in "LGPS Pension calculator" into Google, you'll find a site (one with "lgpsonline" in the URL) which allows you to type in your salary and length of service information and will give you a projection of your pension for when you want to retire. I'm in the scheme and, as an example, I work full-time and if I retire in a couple of years after working full-time for 15 years and on a salary of £40,000, I would get a lump sum of areond £12,000 and an annual pension of around £7500. You will have more service than me but who knows what your salary will be in 20 years? Plus the scheme is changing again in 2014! However, it will give you an idea. You'll get better advice from others on here with a lot more knockledge on this subject than me but my understanding is that if you want to increase your pension your best option would not be an AVC but to increase your regular contributions (ARC = Additional Regular Contributions) which means that the employer will be adding to your own contributions. You can do this up to the age of 65.

CAE

Just a quick point on the previous post. If you Pay additional regular contributions ( ARCs) the employer does not make an additional contribution. ARCs will buy you additional pension, with a minimum additional amount of £250 per annum and a maximum amount of £5000 per annum. How much this will cost you each month will depend on how much you pay in additional contributions, and for how long.

hyubh

russell_anderson wrote: »

if you want to increase your pension your best option would not be an AVC but to increase your regular contributions (ARC = Additional Regular Contributions) which means that the employer will be adding to your own contributions.

That is not correct - ARCs are not matched with additional employer contributions. They are different to AVCs rather in that you are purchasing a fixed amount of extra pension, and that the contributions go into the main pension fund rather than to an insurer.

Google 'LGPS ARC calculator' (no quotes) to see how an ARC contract would work in a particular case. In general terms, given ARCs are about buying fixed amounts of extra pension (as opposed to added years of 'membership'), an ARC contract would probably be more interesting to lower rather than higher paid people and/or part-timers rather than full- (or nearly full-) timers.

moneyfoolish

CAE wrote: »

Just a quick point on the previous post. If you Pay additional regular contributions ( ARCs) the employer does not make an additional contribution. ARCs will buy you additional pension, with a minimum additional amount of £250 per annum and a maximum amount of £5000 per annum. How much this will cost you each month will depend on how much you pay in additional contributions, and for how long.

Sorry I misled. I thought ARC must have some employer contribution otherwise I couldn't see any advantage over the company AVC? Do you know what the advantage is?

CAE

If you have been in the LGPS for 6 years you should receive an Annual Benefit Statement, which will project estimated pension benefits at age 65, based on your circumstances at the time. Only you can decide if you need to pay AVCs to an in house AVC provider. the provider will depend on which company is used by your administering authority, but would be something like Standard Life or Prudential.

An AVC can be taken as a lump sum at retirement, subject to HMRC limits at the time. Your LGPS benefits are generally pension only, although you will get a lump sum for membership before April 2008. A bigger lump sum can be obtained by giving up pension for lump sum at the rate of 12:1.

ARCs will buy you additional pension only.

Please remember that there are changes to the scheme from 2014 although all benefits accrued will be protected.

Hope that helps. More info can be found at https://www.lgps.org.uk

pandora205

The advantage of ARCs over AVCs is that the purchased pension would be index linked and rise with inflation, whereas the payout from AVCs depends on annuity rates (or other interest rates if taken as a lump sum).

ARCs are quite an expensive option - I did look at this a while ago and the cost was prohibitive for me.

CAE

AVCs are subject to the ups and downs of investments, although can be used in LGPS as a lump sum to avoid the 12:1 commutation rate. The contribution rate is decided by yourself. If not taken as a lump sum you must buy an annuity.(pension)

ARCs will buy additional pension only, and the amount you receive at retirement is already known, providing the contract is finished. The monthly amount that you pay is set by the Government Actuary Dept, and is based on the amount of additional pension and how long you want to pay for.

hyubh

Assistant wrote: »

I work 37 hours each week. I an paid for 44 weeks a year. I have been paying into this scheme for 6 years.

You should have received an annual benefit statement (ABS) in the autumn or thereabouts showing your accured pension benefits to date, and projected benefits on retirement (given current scheme rules).

That said, it's fairly simple until 2014:

- Benefits are based on your average whole-time equivalent salary for your final 12 months (unless it was higher before), multiplied by your years of membership pro-rated for any part time working, multiplied by a fraction.

- The fraction is 1/80 for membership up until 31/3/08, and 1/60 for membership from 1/4/08. It's lower for older membership because the lump sum is fixed at 3 times the annual pension for pre-April 2008 service; for newer membership there is in contrast no fixed lump sum.

- Say for sake of argument your actual gross salary on leaving is £16,923, and was like that for the final 12 months. Scaled up to full time this is £20,000 (16,923 x 37/37 x 52/44).

- Also say your paid hours were 37/37 x 44/52 throughout, and that you joined the scheme on 1/4/06; this gives you a pension of 20000 x 2 x 37/37 x 44/52 x 1/80 = £423.08 pa and a fixed lump sum of 423.08 x 3 = £1,269.23 for the membership under the 'old' scheme.

- Added to that will be the membership under the 2008 scheme. Assuming it ends on 31/3/14 (to be replaced with a career average scheme), that will give you further pension of 20000 x 6 x 37/37 x 44/52 x 1/60 = £1,692.31 pa. You could then 'commute' (reduce) this to buy additional lump sum.

- The final component will a career average pension for the final 18 years or whatever. If you aren't expecting (much) career progression, using the 2008 scheme calculation will provide a reasonable estimate - career average will negatively affect those whose pay substantively increases in real terms over the course of their working life, but not make much of a difference for others.

Is it possible for anyone to work out what I may receive per month when I retire? Or am I asking a silly question?

If my numbers haven't helped, the ABS will reveal all!

hyubh

russell_anderson wrote: »

I thought ARC must have some employer contribution otherwise I couldn't see any advantage over the company AVC? Do you know what the advantage is?

ARCs replaced the possibility of puchasing additional membership ('added years'). The advantage compared to AVCs is knowing exactly what you're buying; the advantage over old-style added year contracts is less than nil, which was in fact the purpose of introducing them in the first place (since the additional benefit isn't dependant on future pay rises, ARCs are risk-free for the pension fund).

Assistant

Many thanks for all the replies and advice.

I am in a more knowledgeable position now.