Pension Auto-enrolment - LGPS (Surrey Pension Fund)

hyubh

Lokolo wrote: »

Although I am a little confused as I believe LGPS is a final salary pension scheme, so wouldn't have an impact on auto enrolment because you would usually already be enrolled.

Not that this applies in the OP's case, but it is actually possible to employed by an organisation that offers LGPS membership without the LGPS being the scheme the employer uses for auto-enrolment in the current sense of the term. Also, the sort of 'auto-enrolment' practiced in the LGPS before October 2012 wasn't quite so onerous - a person could opt out before they started, and weren't automatically put back in again after a period of time. Moreover, most casual employees weren't eligible for membership in the first place.

As such, when a local authority or other LGPS 'scheduled body' reaches its auto-enrolment staging date, everyone who had opted out or (in many cases) weren't eligible previously are being put into the scheme and have to opt out again if they want to stay out.

atush

CharlieRabbit01 wrote: »

in any case can anyone tell me in laymans terms what the scheme is, why is it good etc etc.

A DB pension gives you a guaranteed income for life in retirement, indexed, plus a spouses pension based on yur final salary and number of years of service. Also Ill health retirement and death in service (a bit like life insurance).

This means 100% of the risk is with the employer, it doesn't matter a jot to you what the market is doing.

To replace this pension, in the private sector, would in all likelyhood cost you 30% of your salary. If the markets were doing well or average. Of the market did worse, the risk would be all on your shoulders and you'd have to pay in more or work longer and not retire.

CharlieRabbit01

JoeCrystal wrote: »

Okay. A very quick summary on what it is and why it is so good.

1. You pay into a pension scheme so you can get an income when you retire in your old age. There are different pension schemes but tend to be divided between defined benefit pension scheme and defined contribution pension scheme.

The defined benefit pension scheme is what LGPS is and the employer will pay you benefit accrued. So, under the current scheme, let say you work for five years on 60th rate and you left a job with a salary of £20,000. The LPGS WILL pay you £1666 per year (index-linked to your salary you was on when you left and when the pension starts paying, it will be index-linked as well.)

The employer took on all the risks and prices to pay you that benefit. Which is why it is very expensive for the employer and indeed, the price you would be paying is pittance compared to what your employer is paying into.

Another advance with the defined benefit pension scheme that there are extra benefits such as ill retirements and death in service payout if you died.

As your employer HAVE to pay it out when you retire and for rest of your life, it is safe and will be honoured from the Council taxes.

If I want to do something similar privately (which I do), I am paying in 25% of my income (roughly) for the next four decades and it is entirely depending on how well my investments perform, how the pension funds performs and how the annuity rates are. I might have to pay even higher to meet the target income. If I am unlucky, I may find the income I was counting on would be too little and I will still be working.

On the other hand, you know exactly what you are getting and the pension income will rise with each passing year of service and pay rise as it is linked to your income. As I said, the cost is very cheap for you and you will be losing out massively by not opting in.

Needless to say, not opting into such a generous scheme would be highly likely would be either your worst financial decision ever or among the worst decisions you would ever make.

You do not have to do this but if you give us your income and how many years you have work for LG, I could work out how much you lost in potential retirement income.

Thanks,
Joe

Thanks for the info.

And thanks for the offer but I see no benefit in working out what I've lost. I can't change the past.

I realise I should have opted in sooner but at the time there was no way i could afford it.

Its taken time to gain some sort of financial stability.

atush

And you might have found that stability faster here on sister forums where they help with that too.

Still, you've joined and that is a good thing.

If you find you can save more (and have 3-6 months spending saved in ISAs) then look at the AVCs.

CharlieRabbit01

atush wrote: »

And you might have found that stability faster here on sister forums where they help with that too.

Still, you've joined and that is a good thing.

If you find you can save more (and have 3-6 months spending saved in ISAs) then look at the AVCs.

Possibly, but I'm getting there, I can at least say I have learnt from my mistakes and probably about as savvy as I can be now, so a pension is the next step then maybe if by magic I win the lottery (which I don't play) I might own a house one day.

What is an AVC?

Lokolo

AVC = additional voluntary contributions.

taktikback

No offence meant, but the op seems to be asking some bizarre questions. The employer gives out pension booklets - surely they should be read before coming back and declaring "I don't understand pensions". Presumably, the decision to opt out in the first place wasn't just a random act? I appreciate that it can be difficult to understand the finer detail, but the basics are set out clearly in the literature.

Sometimes it's better for the individual to make an effort to understand, which would make it easier for the regulars on here to more easily offer more effective support.

hyubh

taktikback wrote: »

No offence meant, but the op seems to be asking some bizarre questions. The employer gives out pension booklets

One would expect so, though it's possible the OP's HR was lazy and just directed them to the administrator's website like the OP said they did. Mind you, that website is pretty good - I've found the following page on it in about 5 seconds:

http://www.surreypensionfund.org/understanding-pensions/pension-basics.aspx

The link to the national LGPS site shown there also leads to good introductory material.

Presumably, the decision to opt out in the first place wasn't just a random act?

It isn't actually clear the OP *did* ever opt out (maybe they did, maybe they didn't) - they might be a casual worker who wasn't eligible for LGPS membership before.

taktikback

Well - their post #3 says "I opted out when I started here". Not something one can do without being given the relevant information on what is being given up - it would be on the declaration they signed.

Also - your link illustrates the point nicely:

"LGPS is a final salary scheme (also known as defined benefit). It pays an income and tax free lump sum and the amount depends on how long you were a member and your final earnings. While you are working, you pay a percentage of your pay into the Scheme towards the cost of providing this benefit - the employer pays the rest."

Looks like Layman's terms to me. Perhaps you are erring on the side of generosity?

hyubh

taktikback wrote: »

Well - their post #3 says "I opted out when I started here".

Ah yes, I managed to miss that. Chances are the opt out form the OP completed was at the back of the scheme booklet...!

Also - your link illustrates the point nicely:

Well yes, that's why I called it 'pretty good'!