LGPS transfer in - advice please

konahooha

Hello, hope one of the forum's LGPS experts can help me with this one.

I am (belatedly) transferring in a substantial pot from a non-club scheme which I left in 1996 (my current employer has exercised its discretion to allow me to do this). I have been in LGPS continuously since 1997.

This pot will buy service in LGPS; the amount that I could buy has been expressed in 80ths plus lump sum.

I have had different answers about whether this service will bring forward the date on which I can retire after 60 without early payment reduction on my pre-2008 service (ie bring forward my CRA).

Also about whether this transferred in service will itself be eligible for payment without reduction when I reach my CRA.

Sorry this is a bit technical for the general reader. The question seems even to confuse my pension scheme.

Many thanks for considering it.

Konahooha

Drp8713

Who is your scheme administrator?

Rules say if you were active as at 31/03/2008 that a tranfsfer in should buy you 80ths. However, in reality it has been 5 years since 80ths transfers in were used. The Government Actuaries Department no longer issue factors for 80ths transfers in, the only non club factors are buying 60ths with a pension age of 65 so how they are going to do it would be a concern.

Unless they are going to use old factors, but they have removed AMC and changed the way conversion factors are calculated since then. Another posibility is AVC added years purchase factors but thats not strictly right either. Just the name of your scheme administrator / council you work for will be enough to know if they will do it with some common sense.

If it does buy you 80ths then yes it will count towards your 85 year rule date.

Very roughly, it is whether you meet the rule and are 60 before 2016, or before 2020 will determine whether you get all of your benefits with no reductions, your pre 2008 benefits with no reductions but your post 2008 benefits with tapered reductions (basically interpolating 85 year rule reductions and age 65 reductions) or pre 08 benefits unreduced, post 08 benefits full age 65 reductions.

konahooha

Thanks Drp8713

My scheme administrator is LPFA (London Pensions Fund Authority). They've given me a written transfer value expressed as 80ths/lump sum and conflicting verbal advice on the CRA issue.

I'm 51 so I know that only my pre 2008 service will be protected once I achieve CRA (which is when I am 61, at the moment).

But as this transfer has been calculated in a pre 2008 basis, I thought it might count as pre-2008 service too.

Hope that makes sense.

Many thanks
Konahooha

Drp8713

The LPFA are very good so im sure they will seek technical clarification on the best way to calculate the transfer so you should be fine in that respect.

In terms of whether it should count towards your 85 year rule, im afraid you have stumbled on one of the joys of hte LGPS and its all about how you interpret things. My instinct would say yes, but please see the below:

LGPS 2008 – GAD actuarial transfer and ARC factors

On 13 December, DCLG issued version 3.1 of the GAD actuarial factors for individual Club and cash equivalent transfers. This latest version includes the factors required for inward non-Club transfers. The accompanying covering email from DCLG stated:

“The revised factors come into effect on 1 October 2010 and should be used for all Club (incoming and outgoing) and non-Club outgoing transfer calculations from this date.”

The covering email fails to state what administering authorities should do for those cases where they have processed actual inward non-Club transfers since that date using the previous inward non-Club transfer factors. One option administering authorities might consider is to re-process the service credit calculation but using the new factors. If the subsequent service credit is greater, a revised service credit could then be awarded.

The Technical Group discussed the revised GAD guidance at its meeting on 16 December.

The Technical Group unanimously agreed that what was needed was a clear statement from DCLG that, as from a specified date, all transfers in should:

(a) purchase a 60th service credit;
(b) be based on an NRD of age 65 (with a full 5 year percentage reduction adjustment);
(c) count as Part D membership; and
(d) the service credit should not count towards the 85 year rule (where the person had been a member of the LGPS prior to 1 October 2006).

This would also require an amendment to Schedule 1 of the LGPS (Transitional Provisions) Regulations 2008 to disapply regulations 122(6C) and 122(6D) of the LGPS Regulations 1997 and an amendment to paragraph 3(1)(b) of Schedule 2 to the LGPS (Transitional Provisions) Regulations 2008 to provide that the transfer credit does not count towards the 85 year rule. The GAD transfer guidance would also need to be amended to reflect this.

On 23 December, DCLG issued a letter confirming that:

• interfund adjustments where the request to transfer was made prior to 1 October 2010 should be paid based on the pre 1 October 2010 factors;
• the reason that there are no 1/80th non-Club transfer-in tables is that, from the date of issue of the letter, and for all cases involving new joiners since 1 October or the extension of the 12 month period, Funds should use the 1/60th factors in all cases and explain – in particular where an extension has been sought – that this is the method which will be used; and.
• factors to deal with ARC payments are still subject to GAD clearance.

Whilst the letter has sought to cover (a) and (b) above, it has not addressed (c) or (d) in any way (nor given any assurance about the two sentences under (d) above). The LGPS (Transitional Provisions) Regulations 2008 have saved regulation 122(6C) of the LGPS Regulations 1997. That regulation says that for a person who was an active member of the LGPS immediately prior to 1 April 2008 the transfer in shall be treated as pre 2008 membership. That would mean that it should purchase an 80th service credit, be calculated using a CRA that takes account of the 85 year rule (if the person had been a member of the LGPS prior to 1 October 2006), and count as Part A membership. The cases this would apply to (which we will term “protected members”) are those where:

(i) a person was in the Scheme prior to 1 October 2006 and the employer agrees to extend the normal 12 month time limit for a transfer in election; and

(ii) a person was in the Scheme prior to 1 October 2006, leaves to work elsewhere, returns to local government, elects to combine the 2 periods of LGPS membership and elects within 12 months of returning to the LGPS to transfer in the non-LGPS pension rights in respect of the period of employment elsewhere.

Clearly, if administering authorities simply follow the letter from DCLG and calculate a service credit for a "protected" member based on 60ths and an NRD of 65 (with a full 5 year percentage reduction adjustment) this:
- would appear to be counter to the requirements of saved regulation 122C of the LGPS Regulations 1997; and
- would normally give a larger service credit than if it was based on 80ths pension with a 3/80ths lump sum and a CRA earlier than age 65. The effect will be to drag forward the CRA of the protected member to a date earlier than seems appropriate.

Drp8713

I know that might seem like jibberish to most people, but my summing up of it is basically DCLG said it should buy 60th and no 85 year rule but the LGPS regulations contradict this and say 80ths and 85 year rule protections.

The fact that they are offering you 80ths means they may be going by the regs and therefore may give you 85 year rule protections too. Or they may give you 80ths but no protections under the 85 year rule to essentially meet in the middle of the two contradicting documents. is really up to how they read it.