LGPS retirement help needed please!

My_perfect_cousin

Hi. I would welcome advice please as I am about to make a major retirement decision! I work in local government. I changed jobs in mid-autumn 2013. My pay for my pre-autumn job was significantly higher than in my current job. I now work for a different local government authority. The pension scheme for my new employer is managed by my previous employer (this is the case for all employees in my current authority. I was and still am a higher tax rate payer. I am 54 - born after April 1960. I do not have AVCs. I have 30 years pension service in my previous role. I have less than 1 year in my new one. I am aware that I can combine my 2 pensions or freeze the 'old' one. I need to decide by mid autumn 2014. Whilst combining the 2 would appear unwise, I have been told by the pension team that, if I combine them but opt out or leave the scheme within 2 years of leaving my old post, my pension would be based on the final year salary of my 'old' post as this would be within 3 years. Given the alternatives, this sounds like to way to go - combine then opt out by mid autumn 2015... but I'd welcome any views etc. Amongst the many things that I do not know... Could I end the pension in autumn 2015 but choose not to take the pension and still work? I know that the pension would be actuarily reduced - but could this be lessened if I end but not take my pension in autumn 2015? sorry for so many questions!:)

System

Hi

Well if you had broken the story down into paragraphs....

Generally speaking the LGPS uses the best of the last 3 years salary, provided by your employer.

So get your previous 3 years history and present it, and ask the LGPS to confirm details with your employer.

You should have statements etc from your pension provider.

Establish the benefits by asking for a forecast/review of all options IN WRITING and face to face.

Since the LGPS has changed to a CARE scheme you will have another pension to add to your list.

If I understand correctly you have 30 years service, assuming full time.

Now the 80ths ended 31/03/2008, 6 years ago. Roughly speaking you have 24 years in that.

Then the 60ths scheme started on 01/04/2008 and ended 31/03/2014 giving you 6 years in that.

So divide 24 by 80 and work out the percentage. That's 30 per cent.

Divide 6 by 60 and get 10 per cent.

Together you have 40% of a salary figure as a pension. This is then multiplied by your salary and the amount is known.

The CARE scheme is a 49ths so that is 2.04 per earned every year at that years income, and it gets revalued.

Your 'old' LGPS (pre care) scheme will as I understand it become a Deferred Benefit, known as DB or PB Preserved benefit. It will then get revalued with inflation.

In MY view the LGPS is one of the best schemes going and I would not want to leave / opt out or whatever, but that is what would suit me sir. What suits you is only known to you. Also I PERSONALLY would load my pension with an AVC or similar, but only you know what is right for your circumstances.

So if you break down your pension history into chunks you may be able to better understand it.

Also your administering Authority may not be very good.

I may be able to post some more help later.

hyubh

johndough wrote: »

You should have statements etc from your pension provider.

Going by what the OP says, the previous provider is the current provider (i.e., it's the same LGPS fund). As such, the same people will hold and maintain the pension records for both jobs.

Establish the benefits by asking for a forecast/review of all options IN WRITING and face to face.

Aside from getting the options in writing, seems a bit OTT, especially the 'face to face' bit - imagine personally interviewing every active member of a medium-sized LGPS fund, so about 40K individuals given school support workers are auto-enroled into the scheme..

Also I PERSONALLY would load my pension with an AVC or similar, but only you know what is right for your circumstances.

In the OP's case a new AVC would be would be a post-April 2014 one, so less attractive than before (you can buy an APC with the proceeds, but not a lump sum in the way you could previously).

So if you break down your pension history into chunks you may be able to better understand it.

The main issue here is the impact of various protections on the constituent parts rather than those parts in themselves I think.

Also your administering Authority may not be very good.

Er, well they've managed to give him the (useful) thought that combining may prove beneficial despite the pay drop!

System

Here's one I made earlier...

There are 2 Guesstimator spreadsheets, an absolutely excellent one for the enlightened among you, it works in LibreOffice. The other is excel.

Also onscreen guesstimator.

Goto
pensionpage webspace virginmedia com/

added some slides that work with LibreOffice and MSO

System

hyubh wrote: »

Going by what the OP says, the previous provider is the current provider (i.e., it's the same LGPS fund). As such, the same people will hold and maintain the pension records for both jobs.

USUALLY

Aside from getting the options in writing, seems a bit OTT, especially the 'face to face' bit - imagine personally interviewing every active member of a medium-sized LGPS fund, so about 40K individuals given school support workers are auto-enroled into the scheme..

SEE BELOW

In the OP's case a new AVC would be would be a post-April 2014 one, so less attractive than before (you can buy an APC with the proceeds, but not a lump sum in the way you could previously).

HIS CHOICE


The main issue here is the impact of various protections on the constituent parts rather than those parts in themselves I think.

Er, well they've managed to give him the (useful) thought that combining may prove beneficial despite the pay drop!

I was an LGPS officer for several years and members don't get good information, it may be accurate, but it isn't understandable to the general membership.


At 54 he is unlikely to be be protected under the rule of 85 to any great degree.
I sat and chatted to a friend who is still a member and he was told that the rule of 85 still applied to him - it doesn't.

Yes I did 1-2-1 sessions. In 4 days I managed 80 plus in care homes that were transferring. I did group and individual sessions, mainly to the District councils, but some schools/colleges.

Auto enrolment is a myth, it doesn't really exist for school employees who are given a 1 year (or less) contract. The vesting period is 2 years in the LGPS. So you join, your contract ends, your LGPS membership ends and most Local Authorities have been told the LGPS is acceptable, so there is no alternative scheme.

Nick_C

In your position, I would be tempted to keep the two pensions separate. You old pensions will be indexed linked to CPI, and is likely to rise faster than your salary.

If you expect to achieve promotions that would take you beyond your previous pay scale, or if you are hoping to get early retirement through redundancy at some point, then it might be worth transferring the former pension to your new employer.

Your first pension probably has a protected retirement age of 60. Your new pension will have a normal retirement age of 66/67? Find out what the effect of combining the two pensions would have on your retirement age. If your pensionable age is 60, make sure you don't lose that.

hyubh

My_perfect_cousin wrote: »

My pay for my pre-autumn job was significantly higher than in my current job.

Just to confirm - is your rate of pay is significantly lower than before, and not just your actual, take-home pay? (Imagine a full timer on £50K who goes down to £25K because they've halved their hours: in such a case the rate of pay has stayed the same.)

I now work for a different local government authority. The pension scheme for my new employer is managed by my previous employer

By which you mean, it's the same LGPS fund, presumably? (Outside of London, the LGPS in England is organised on a broadly county basis with one authority administering the pension fund both for itself and others in the locality.)

I am aware that I can combine my 2 pensions or freeze the 'old' one.

'Freezing' the old one would actually be keeping it deferred - if it were literally 'frozen' its value wouldn't increase by inflation every year.

I have been told by the pension team that, if I combine them but opt out or leave the scheme within 2 years of leaving my old post, my pension would be based on the final year salary of my 'old' post as this would be within 3 years.

This is a standard protection under LGPS 2008 - your final 'pensionable pay' is the better of:

1. The average of your whole-time pensionable pay for the last 12 months.

2. The average of your whole-time pensionable pay for the penultimate year.

3. The average of your whole-time pensionable pay for the third-from-last year.

Normally the years concerned relate to the same job, but if you combine memberships then they could relate to different ones indeed.

An important point to note is that the averages are compared ignoring inflation; moreover, if there is a tie then the year that is used is the later one. If however a previous year's average is picked, then it is uprated for inflation when calculating the actual pension (which is good, because it produces a higher pension...).

Given the alternatives, this sounds like to way to go - combine then opt out by mid autumn 2015

Hmm, not so sure. Assuming you are in England or Wales, do you benefit from the 'underpin' in the new LGPS? If you do, then you would actually give it up by opting out before your 2008 scheme normal retirement age. If you don't get underpin protections, then the only membership added to your final salary pension gained by combining would be from Aug 2013 to March 2014; the remainder would be a CARE pension on top, as johndough explained.

Could I end the pension in autumn 2015 but choose not to take the pension and still work?

Yes. However, it might be better to keep the DB as it is in order to draw it at 60-something while still working and in the scheme accruing a second, mainly CARE pension.

I know that the pension would be actuarily reduced - but could this be lessened if I end but not take my pension in autumn 2015?

Of course, because you wouldn't be actually drawing the pension and so wouldn't be costing the pension fund money. (The actuarial reduction is purely to limit that.)

hyubh

johndough wrote: »

I was an LGPS officer for several years and members don't get good information, it may be accurate, but it isn't understandable to the general membership.

How would you define 'good information'? The amount of information publicly available is larger than ever before, both in terms of simple guides and the technical information administering authorities themselves rely on to make decisions (i.e., the publications of the LGA's pensions working group). The more complex the issue (and I count the OP's situation as pretty complex), then more matters are just inherently difficult to understand without technical knowledge.

At 54 he is unlikely to be be protected under the rule of 85 to any great degree.

Reading the original post again I see the OP indeed alluded to that himself (see the reference to being born after April 1960).

Auto enrolment is a myth, it doesn't really exist for school employees who are given a 1 year (or less) contract.

Huh? Up to half the active membership of most LGPS funds will be school support workers, the majority of which will be low paid part timers.

The vesting period is 2 years in the LGPS. So you join, your contract ends, your LGPS membership ends

... and many teaching assistants (for example) get a contract with another (or the same) school. If you think LGPS membership is a bad thing for school support staff, you are very wrong, particularly with the CARE scheme's accrual rate.

most Local Authorities have been told the LGPS is acceptable, so there is no alternative scheme.

A scheduled body has to auto-enrol relevant staff into the LGPS - councils and state schools (including academies and free schools) aren't 'told the LGPS is acceptable', they have to join it.

My_perfect_cousin

thanks all - wow!

I really appreciate all replies - thanks again

I didn't use paragraphs because I am not used to forums allowing them - I will do so now.

Additional info - My annual pay rate in my previous post was a fair bit higher than the full time rate for my present part-time post. I am not likely to be seeking a post that would pay at the rate of my previous post. As such, my best year of pay will be that in the last year of my old job. It is for this reason that I am thinking that the combined / end / use best of 3 years is attractive.

I would certainly not wish to have my full pension based on my current (and future) full time equivalent salary given that I have a higher salary up to autumn 2014.

I work in England. Both my previous employment and present fall within the same pension scheme of the 2 authorities -it is managed by my previous employer.

My pension officer has told me in writing (email) that:

1. It it doesn't matter when I meet the rule of 85 - so long as I meet it before age 60. I have been told that I will meet the rule of 85 on 1st September 2014 - my age and service will total 85 at that point.

2. If I close my 'old' pension I would not be able to voluntarily retire and access my 'old' pension 'until at least age 60'.

3. If I combine the two pensions I would be able to access my pension benefits voluntarily from age 55 (with actuarial reduction) but all the pension earned before 01.04.14 would be calculated using my final salary in my 'new' post. (This is clearly not good - due to the lower rate of my new post.) - (I will need to ask him about the extent of actuarial reduction - whether it is from age 60, 65 or something else)

4. The exception to this would be if I combined the pensions and left the scheme at a date that was 2 years after leaving my old (higher paid) post (mid autumn 2015) - as this would result in my pension being calculated on the final year of my old post - the highest rate that I expect to be paid until I retire.

My thinking is that I would continue in my new part time post after mid autumn 2014 - after potentially leaving the LGPS - it is likely that my new employer would allow this. I am likely to reduce my contractual hours further in the future. I may well seek to work up to 60 - but with reduced hours. As such, my salary will continue to reduce.

Whilst I am naturally cautious, I would hope not to need to access my pension until age 60.

I was a bit phased by the 'at least 60' comment by the pension person - and my fear that the pension rules may change and make access to my pension less favourable in the future.

My dilemma is how to make best use of the previous (higher) pay rate to get the best pension possible. I guess that I see the 'combine, leave in autumn 2014, best of 3 years' as a bird in the hand.

BTW - is it likely to be possible for me to leave the pension scheme in autumn 2014 but continue in my new post? Would I be obliged to open up another new pension?

I hope that this adds useful info - I would really value any more advice.

thanks all again

MARTYM8`

I would personally seek independent advice. I wouldn't always trust the admin staff working for the pension fund - its not in their interest to maximise your pension.

Normally if your pay is significantly lower in your new job than your old one and you are close to retirement/unlikely to get promoted you should not transfer - as your pension once merged will be based in your final salary in your new job (which is lower than your old job). If your employer has changed - it is a new job for LGPS pension purposes even if its still part of the same pension fund (i.e. some funds cover lots of employers).

You would leave the benefits deferred - and they would rise by CPI annually until you claim them. We may never live to see the day when local government workers get a pay rise above CPI - so its a good deal as your current job is unlikely to reach that before you retire.

You actually get more death benefits if you don't merge - 3 times your salary in your new role plus 5 times your deferred pension in your old role. The one issue that can arise is if you take early retirement now in your new role and are offered it - as its based on years served in total.

Cos pension transfers in the LGPS have lots of potholes given 85 year rules and other issues. Given you have loads of pre 2008 service you could potentially take almost all your previous pension rights without reduction at 60 under the 85 year rule protection as well.

Whats best may also depend on your plans e.g. do you want early retirement/will you be made redundant and offered that.

So seek advice please - dont rely on the admin staff - cos the LGPS rules are complicated even for the informed!

My_perfect_cousin

Not wishing to move away from the key pension queries - but with regards to redundancy / early retirement.

I had thought that redundancy payments were based on years of service rather than pension contributions. I have continuous service (that has been accepted by my new employer) since 01.09.81.

BTW, my pension runs from 01.09.83 as there is no record of pension contributions in my first post. (no luck with the tracing service)

I had therefore thought that, if I am made redundant, the payment would be based on service rather than pension matters.

I expect that any decisions that I make regarding my pension would impact on any voluntary retirement offer however.

I am not aware that either option is in the pipeline in my current post.