LGPS - should I buy additional Pension?

bitofatit

I joined the LGPS 4 years ago. Looks like I'm getting made redundant nxt year (58 yo).

I could scrape together £4k now and wondered does it make sense to purchase some additional LGPS pension now - is it a good deal? The LGPS calculator shows I would get £311 pa from age 65 for a £4k one off payment now.

I am fit and healthy at the mo and do have another pension in payment.

Cheers for any views

BoaT

atush

Probably, esp if they will let you retire early with no actuarial reduction as you are over 55. Check this. As it doesn't make a lot of sense to pay for extra pension, then have the entire pension reduced 10% or more for taking it early.

What is your scheme age?

bitofatit

Not sure what you mean atush re: Scheme age? If I'm made redundant I will receive my full pension without reduction but I'm not sure whether the additional bit will be out in payment then or at 65.

Cheers

boaT

atush

Scheme age is either 60 or 65 depending on when you joined I guess. Not in public sector so I dont keep track.

If yours is age 65, and they will let you retire early with 100% of your built up pension rights then go for it. Otherwise yoru reduction would have been 35%!

Will you get redundancy too, or is the pension boost your redundancy? If you get redundancy, can you put some of this into pension? If not, you could put some of it in a DC pension.

bitofatit

Scheme age is 65. As I'm being made redundant they will pay my pension without reduction straight away. As I said - I don't know if they will pat=y the extra bit until 65. So I guess that's the point of my question.

If for the additional bit I have to wait 6 years for even with the tax benefit on paying in and the value gong up with CPI each year, is this a good way to invest £4k

Cheers - anyone?

Teaandscones

bitofatit wrote: »

Scheme age is 65. As I'm being made redundant they will pay my pension without reduction straight away. As I said - I don't know if they will pat=y the extra bit until 65. So I guess that's the point of my question.

If for the additional bit I have to wait 6 years for even with the tax benefit on paying in and the value gong up with CPI each year, is this a good way to invest £4k

Cheers - anyone?

It probably isn't a good a good idea to buy additional pension, because although the additional pension can be a reasonable though necessarily expensive option, you would be forced to take the additional pension at the same time as your main pension with a large actuarial reduction. Unlike your main fund.

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

If your NPA under the new scheme is 66, then if you were 58, then you would have a 7-8 year actuarial reduction which would be hefty. The LGPS actuarial reduction factors are punitive and not actuarially neutral.

kidmugsy

With the new flexibility for pensions you might find it attractive to bung the £4k into a personal pension of some sort. That's assuming that you have no expensive debts, and a good cash emergency fund.

bitofatit

Teaandscones wrote: »

It probably isn't a good a good idea to buy additional pension, because although the additional pension can be a reasonable though necessarily expensive option, you would be forced to take the additional pension at the same time as your main pension with a large actuarial reduction. Unlike your main fund.

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

If your NPA under the new scheme is 66, then if you were 58, then you would have a 7-8 year actuarial reduction which would be hefty. The LGPS actuarial reduction factors are punitive and not actuarially neutral.

Thanks Teaandscones - I had hoped someone would say the opposite. In particular say that - as you are made redundant and they will pay you full normal pension, without Actuarial reduction, the same might apply to any APC I bought now? If this is not the case it would seem pointless.

Cheers

Teaandscones

bitofatit wrote: »

Thanks Teaandscones - I had hoped someone would say the opposite. In particular say that - as you are made redundant and they will pay you full normal pension, without Actuarial reduction, the same might apply to any APC I bought now? If this is not the case it would seem pointless.

Cheers

Nice try, I like your thinking, unfortunately the regs say otherwise:

https://www.lgpsregs.org/index.php/benefits

para 30 (7)

If it was as you hoped, then it would be a big loophole for anyone over 55 facing redundancy in local government.