Topping Up LGS Pension - ARCs vs AVCs?

jem16

gardenia101 wrote: »

Sorry, missed this post Jem.

I was wondering the same thing, since they are rather expensive. But the way I've always understood it (which could be wrong ) is that it would take a much bigger private pension pot to provide a similar level of benefit to ARCs/APCs. Since I don't earn very much, could I get anywhere close to the private pension pot needed?

Yes you are correct in this and it certainly is one of the best ways of topping up your pension with no risk to yourself.

However do you think that you may need to retire early? if so your ARCs are going to be actuarially reduced as well as your main LGPS. This makes it less good.

gardenia101

jem16 wrote: »

Yes you are correct in this and it certainly is one of the best ways of topping up your pension with no risk to yourself.

However do you think that you may need to retire early? if so your ARCs are going to be actuarially reduced as well as your main LGPS. This makes it less good.

I can't imagine doing my own job until I'm almost 68 (or whatever SRA will be by then - 90?) as it is quite physical in a lots of moving things/stretching/bending/kneeling kind of way.

I expect I'll have to leave my own particular job long before then due to increasing sight loss, but I may not necessarily have to leave my school employer as there may be admin work I could do with an adapted computer - no idea what my employer would think about this or if they'd want to keep me on/be obliged to keep me on (bearing in mind I'm rubbish at admin :rotfl:)?

If they wanted to medically retire me then even after reading this I'm still a little confused, sorry. Not sure where the 30 hour/week limit comes in as I'm already working less than this (24 hours) as I simply couldn't cope with 30 hours. I can see they wouldn't consider 24 hours weekly term time only gainful employment (jolly well feels like it though) so does it make any difference to how I may be treated if I needed to be medically retired that I'm not considered gainfully employed at the moment?

The decrease from 30 to 24 hours wasn't done on health grounds though, as my sight hasn't worsened for some time thankfully. It was done because I wanted a clear day off to be able to help my mother & just do stuff without my kids being around. We we're taking on additional staff so it was an ideal time to drop hours & have them take up those hours.

Although a lot of the not coping is because I'm a single parent, so hopefully a lot of the children related faff & additional work will disappear in 10 years or so. If I didn't have them then I'd probably cope with 30 hours/week. But fairly soon I'll also have additional caring responsibilities for an aging parent so I dread to think how that's going to fit in with work, kids, my own health problems

jem16 wrote: »

So would I but the situation may have changed with the OP having to work less.

My concern would be if he/she has to leave work before normal retirement age and her pension is reduced. If there was also a personal pension to take it could avoid that reduction. This will only be possible with the new rules from April 2015.

Do you mean that I could only take the above option under the new rules if I start a personal pension after 4/15? Or could I start one straight away & still use it as you suggest?

Sorry to be a bit slow again & thanks (again).

jem16

gardenia101 wrote: »

Not sure where the 30 hour/week limit comes in as I'm already working less than this (24 hours) as I simply couldn't cope with 30 hours. I can see they wouldn't consider 24 hours weekly term time only gainful employment (jolly well feels like it though) so does it make any difference to how I may be treated if I needed to be medically retired that I'm not considered gainfully employed at the moment?

I wouldn't think it would matter at all. What matters is whether or not you can do your job or any job as to what level of ill-health payment is awarded.

However just to point out that if you did qualify for ill-health retirement, your pension should not be reduced, including your APC.

Do you mean that I could only take the above option under the new rules if I start a personal pension after 4/15? Or could I start one straight away & still use it as you suggest?

Sorry to be a bit slow again & thanks (again).

No you can start anytime you like but you wouldn't be able to use it as I suggested until after April 2015. However as you're only 45 now you won't be able to access it till at least age 55 and probably 57/58 in your case as they're likely to change the age at which you can access a pension to 10 years before state retirement age.

gardenia101

jem16 wrote: »

I wouldn't think it would matter at all. What matters is whether or not you can do your job or any job as to what level of ill-health payment is awarded.

However just to point out that if you did qualify for ill-health retirement, your pension should not be reduced, including your APC.

Thanks Jem - understand all that now.


No you can start anytime you like but you wouldn't be able to use it as I suggested until after April 2015. However as you're only 45 now you won't be able to access it till at least age 55 and probably 57/58 in your case as they're likely to change the age at which you can access a pension to 10 years before state retirement age.

Oh my goodness, more pension stuff to think about. What you say makes absolute sense though, & ideally what I want is something I can access around 55 - 58. I think I'll be OK pension wise later as my small NHS pension pays out at 60, I have a small amount from an ex husbands service pension & a small company pension I paid into in the 80s has just been found (requesting forecasts).

Assuming the AVC option of the LGPS is inappropriate since I have to take it at the same time as my main LGPS? I recycled all the info I had when I'd made the decision about the ARCS :rotfl: but that is how I read the linked document.

So I'm assuming you mean a completely new personal pension separate from anything else? And if so where would be the best place to start investigating.....

Is there a standard rule for medical retirement regarding personal pensions, or are they all different?

My other option is dumping a lump sum into an APC (for the LGPS) & risking I'll take a hit if I need to retire early but not on medical grounds. At least there is no risk that I'll lose that money is the markets crash. Is there an easy way to see how much my APC & ordinary pension would be reduced if I took it early?

Thanks.

jem16

gardenia101 wrote: »

Assuming the AVC option of the LGPS is inappropriate since I have to take it at the same time as my main LGPS? I recycled all the info I had when I'd made the decision about the ARCS :rotfl: but that is how I read the linked document.

It appears that they must be taken at the same time as the main scheme.

So I'm assuming you mean a completely new personal pension separate from anything else? And if so where would be the best place to start investigating.....

That depends on whether or not you want to DIY or you need advice. If DIY try Cavendish Online. If you need help then https://www.unbiased.co.uk to find an adviser.

Is there a standard rule for medical retirement regarding personal pensions, or are they all different?

It's really only occupational schemes that allow ill-health retirement. For all others you can access them from age 55 (at the moment) or immediately if there was a terminal illness involved.

My other option is dumping a lump sum into an APC (for the LGPS) & risking I'll take a hit if I need to retire early but not on medical grounds. At least there is no risk that I'll lose that money is the markets crash. Is there an easy way to see how much my APC & ordinary pension would be reduced if I took it early?

Thanks.

This table should give you an idea. You can retire from age 55 but you need to have your employer's permission before age 60.

http://www.lgps.org.uk/lge/core/page.do?pageId=102567

gardenia101

gardenia101 wrote: »

My other option is dumping a lump sum into an APC (for the LGPS) & risking I'll take a hit if I need to retire early but not on medical grounds. At least there is no risk that I'll lose that money is the markets crash. Is there an easy way to see how much my APC & ordinary pension would be reduced if I took it early?

Thanks.

jem16 wrote: »

This table should give you an idea. You can retire from age 55 but you need to have your employer's permission before age 60.

http://www.lgps.org.uk/lge/core/page.do?pageId=102567

Thanks Jem.

I'm considering the APC lump sum option for its simplicity & guaranteed outcome, both of which are far more appealing to me that investing in the stock market. This may sound mad but I'd like someone to check my thinking on this please -

If I opt to buy £2000 p.a. pension for a lump sum of just over £19000 & it's actuarially reduced by 40% (from the table in Jem's post above) if I retire 10 years early (on non ill health grounds) then I'll only receive an extra £1200 p.a. Have I got that right?

TBH that seems reasonable to me if its guaranteed. Is there an easy way to calculate how many years I'd need to live after retiring 10 years early to get my money's worth so to speak? If I received that £1200 for 16 years then I'd be getting back the lump sum it had cost me - not taking inflation into account here of course, & I assume it can't be that straightforward :rotfl:

I know any APC won't be included in any death grant, & I won't ever have a spouse to worry about so I'm not concerned about either.

But in the APC T&C it refers to benefit reductions being applied if the pension is taken before Normal Pension Age which I thought was the same as your personal state retirement age (almost 68 for me) rather than the scheme's retirement age of 65. So can I assume from the table that I can't retire any earlier than 10 years before SRA (since the table doesn't go past 10 years).

If so how does that fit in with the scheme saying you are able to retire at 55?

What am I missing?

Thanks in advance.

jem16

gardenia101 wrote: »

Thanks Jem.

I'm considering the APC lump sum option for its simplicity & guaranteed outcome, both of which are far more appealing to me that investing in the stock market. This may sound mad but I'd like someone to check my thinking on this please -

No it's not mad if you prefer the guaranteed option.

If I opt to buy £2000 p.a. pension for a lump sum of just over £19000 & it's actuarially reduced by 40% (from the table in Jem's post above) if I retire 10 years early (on non ill health grounds) then I'll only receive an extra £1200 p.a. Have I got that right?

More or less but if you buy £2000pa pension, it's index-linked from the moment it's purchased as well as in retirement. So that £2000pa if bought now would have increased over 10 years and would be higher. Let's say 2% increase p.a. for 10 years, the £2000 would now be £2438 and 60% of that would be £1462.80pa.

TBH that seems reasonable to me if its guaranteed. Is there an easy way to calculate how many years I'd need to live after retiring 10 years early to get my money's worth so to speak? If I received that £1200 for 16 years then I'd be getting back the lump sum it had cost me - not taking inflation into account here of course, & I assume it can't be that straightforward :rotfl:

The £1462pa would also be index-linked with inflation so you've got a rough idea.

In the APC T&C it refers to benefit reductions if taken before Normal Pension Age - is this the same age as the scheme's normal retirement date (65) or is it the same as your personal state retirement age which is a moveable age?

Thanks in advance.

The LGPS 2014 is now a CARE scheme so retirement age is the state pension age. APC I would expect to follow that too but it's something you would need to check out.

gardenia101

jem16 wrote: »

The LGPS 2014 is now a CARE scheme so retirement age is the state pension age. APC I would expect to follow that too but it's something you would need to check out.

Thanks again for the advice Jem. I did as you suggested & sent the following email to my LGPS pension provider -

"I am considering applying for extra pension using a lump sum APC but wanted clarification about my options should I chose to take early retirement.

The LGPS website states "[FONT=&quot]If you choose to retire early (before your Normal Pension Age) the extra pension you have bought will be reduced for early payment."[/FONT]

The table of benefits reductions from the LGPS website also shows % reductions in pensions benefits if taken up to 10 years early, but no figures are present for leaving more than 10 years early.
If I wanted to retire 10 years early then I assume that would be at the age of almost 58, since my state pension age is a few weeks before my 68th birthday, & I understand NPA = SRA.

How then does that early retirement fit in with the schemes earliest retirement age of 55? Are there further % reduction in benefits figures available & if so, what are these & reductions for leaving 11, 12 & 13 years early?"

Their answer is for me to request a pension forecast to see what reductions I'll face. Which wont take into account the APCs at all, since I haven't yet (& may not) taken any out since I don't know what the reduction will be... I also wouldn't want to assume that the APC I may take out will be reduced by the same % as my main pension that would appear on a forecast, but they seem to have not addressed that issue in their reply.

I thought I'd asked for more general info in my email rather than needing the actual figures - any idea what other questions I could ask since I've evidently not asked the right ones.

Thanks in advance.

jem16

gardenia101 wrote: »

I also wouldn't want to assume that the APC I may take out will be reduced by the same % as my main pension that would appear on a forecast, but they seem to have not addressed that issue in their reply.

From the LGPS 2014 website;

If you choose to retire early (before your Normal Pension Age) the extra pension you have bought will be reduced for early payment. If you choose to draw your pension after your Normal Pension Age any extra pension you buy is increased because it's being paid later.

http://www.lgps2014.org/content/additional-pension-contributions-apcs

I thought I'd asked for more general info in my email rather than needing the actual figures - any idea what other questions I could ask since I've evidently not asked the right ones.

Thanks in advance.

Early retirement figures from LGPS 2014 website;

http://www.lgps2014.org/content/when-can-i-take-it

Just remember that this reduction only applies to benefits built up under the 2014 CARE scheme.

Benefits built up under the previous 2008/1995 sections would be subject to those rules - ie Normal Retirement Age of 65/60.

gardenia101

Thanks Jem - I thought the information must be out there somewhere. Shame my pension people couldn't just say what you have....

I feel happier with buying a lump sum APC now, & will just take the hit if I feel I need to retire early. It may not turn out to be the best decision when the time comes but at least I know what I'll be getting, which makes planning so much easier.

Jem - you have been extremely helpful :T