LGPS Investments

taktikback

It's pretty much the same now - 20% is typical. I don't think it should be looked at as "keeping the fund afloat". It was always intended to be that way -pension payments are just deferred salary. That's just the way these jobs are structured. You could get more pay in the private sector and a rubbish money purchase pension - it's just different ways of cutting up the salary cake...

mania112

I worked out the answer to my specific question, if you'd like to know what I did:

A client who is a Muslim, wanted to transfer his LGPS because he felt the investments didn't meet his beliefs.

So, besides the common reasons not to transfer I informed the client that although the LGPS investments were not sharia compliant, the investments weren't his own, personally.

Therefore I felt to be sharia compliant was irrelevant as the onus of the investment fell on the laps of the scheme, not himself.

Furthermore, gambling is a big no-no for Muslims - transferring to a PP was a risk not worth taking.

hyubh

taktikback wrote: »

It's pretty much the same now - 20% is typical.

Such a figure (assuming a scheduled body like a council) would combine both the 'future service rate' (i.e., the money to pay for pensions currently being accrued) + an element representing deficit payments. As such, if you were intending to back up Oblivion, quoting a figure of 20% is a bit misleading - future service rates alone are typically around 12%-14%. Still generous obviously, but the 'cap and collar' provisions being added to the Regs should prevent this rising. Historical liabilities are another matter of course...

I don't think it should be looked at as "keeping the fund afloat".

Au contraire - after all, it's not the employer who sets the rate but the fund actuary, and 'keeping the fund afloat' is in simple terms what drives the rates set every three years. Most academy sponsors (for example) would be perfectly happy to dump their cleaners and teaching assistants into crap like NEST - it's only because the law says they have to be auto-enrolled into a very good pension scheme (i.e., the LGPS) that they are.

hyubh

Oblivion wrote: »

The staff paid 6% to the pension fund (or was it still 5% back then, can't remember)

Historically it was 6% for 'officers' (= most of the membership) and 5% for 'servants'/manual workers.

but each member of staff's salary had to have an on-cost of 20.1% added to cover the council's contribution to the pension fund!

TBH, I'm slightly surprised this particular fund and its actuary must have been on the ball about historical deficits as 'early' as 2003/2004 - are you sure about the dates...?

So, if you employed someone on a salary of £20,000 it actually cost the council £25,660!

Yes but no but... The rate will be averaging the prospective cost of funding the pensions of all active employees + the past ones still with pension liabilities to fulfil, and the profile of the membership will be a key factor in this. I would hazard a guess that if everyone were on salaries of £20K, the rate would have been lower, given the implications of where their salaries would be in 10 years hence...

That was way back then. With the drop in interest rates and investment income, I dread to think what the council's contribution must be now to keep the fund afloat.

You don't have to guess... What's the council, or if you don't want to say, the pension fund...?

taktikback

Don't disagree with that - trouble is, many support staff don't appreciate that their package is what it is because it includes the LGPS, and then opt out effectively giving away a big chunk of their salary..

...hence the number of depressingly naive - "I'm better off investing in property" or "I'm better off putting in an ISA" or " I don't trust the government so I'm going to hide it under the mattress" threads....

hyubh

taktikback wrote: »

many support staff don't appreciate that their package is what it is because it includes the LGPS, and then opt out effectively giving away a big chunk of their salary

Yes - and little do they comprehend how the deal will be getting even better in a half a year's time, albeit for a small increase in their scheme retirement age (not that most will have assumed a distinction between scheme and state retirement ages in the first place).

OldBeanz

mania112 wrote: »

I worked out the answer to my specific question, if you'd like to know what I did:

A client who is a Muslim, wanted to transfer his LGPS because he felt the investments didn't meet his beliefs.

So, besides the common reasons not to transfer I informed the client that although the LGPS investments were not sharia compliant, the investments weren't his own, personally.

Therefore I felt to be sharia compliant was irrelevant as the onus of the investment fell on the laps of the scheme, not himself.

Furthermore, gambling is a big no-no for Muslims - transferring to a PP was a risk not worth taking.

So Mulims can pass their money to a non-Muslim and resolve themselves of all responsibility for the money. That does not seem correct.

taktikback

Strictly speaking, money is just an IOU from the government, so one could argue that any financial transaction in Sterling is tacit support for a corrupt and oppressive western government.

But that would be silly wouldn't it. But then the whole thing is silly isn't it...

mania112

OldBeanz wrote: »

So Mulims can pass their money to a non-Muslim and resolve themselves of all responsibility for the money. That does not seem correct.

You can dissect it in many ways. But I would rather go down the path that gives the member the best security and chance of a wealthy retirement.

I have taken the view that the member is paying into a scheme which will offer him x,y and z. What the scheme does with the money in the interim, I have decided, is irrelevant.

If i'm wrong, he can tell me and we can revisit the issue.

(I also thought the member wanted to transfer and release TFC as he's approaching 55 and unemployed, this was his justification to do so).

woolly_wombat

taktikback wrote: »

Don't disagree with that - trouble is, many support staff don't appreciate that their package is what it is because it includes the LGPS, and then opt out effectively giving away a big chunk of their salary..

Yes, I have been amazed to discover that many support staff at my place of work have done just that. I've used the opportunity to buy added years and ARC's, but my wake up call was seeing what happened to my Equitable Life with(out)-profits pension, to which I contributed at a time of my life when I was earning one hellavalot more than I do now!

hyubh wrote: »

Yes - and little do they comprehend how the deal will be getting even better in a half a year's time, albeit for a small increase in their scheme retirement age (not that most will have assumed a distinction between scheme and state retirement ages in the first place).

Yes but no but! Do you trust governments not to increase the state retirement age again and again in the future? I don't!

Also, the scheme will be moving from 1/60 to 1/49 BUT the pre-2014 part will still be based on final leaving salary, and we all know that salaries will be going down in real terms with increases capped at 1% for the next several years - at least for those of us stuck in school support roles with no realistic prospects of promotion.

I wouldn't want anyone to think I was whining - I'm very grateful for the opportunity I've had to max out on my tiny index-linked pension!

WW