LGPS Pension Modeller Help

martin907

Hi,
I wonder if anybody can help out with an explanation of what I see in the Local Government Pension Scheme Modeller.

I have written twice to my Pension Fund administrators at Rhondda Cynon Taf Council about this but they haven’t given me the courtesy of replying.

I am a 57 year old man and 18 months ago I took up an full time administrative job with a local Further Education college after spending some years in self-employment. I and my employer pay the standard monthly contributions into LGPS.

My question is fairly simple and probably one of terminology but try as I may, I cannot find the answer anywhere.

I have looked at the LGPS site and used the Modeller to try to work out a rough idea of what I would receive as an annual pension from this job at various yearly points up to 10 years when I would hope to retire.

The old pre-April 2014 LGPS calculator showed an expected annual pension but this modeller shows what it describes as a “Pension Account”. Is this is the figure that I could expect as a yearly pension, or does it mean something else? If it does mean something else, is there a way of getting an approximate yearly pension figure. I realize that the final figure can never be exact and will be dependent upon a number of variables but it would be good to know a rough figure.

greenglide

Looking at this - http://lgps2014.org/content/pension-accounts-2 I would say it is the pension earned so far.

As it is a CARE scheme now then each year's membership stands on its own and is uprated by inflation. This is different from the FS scheme were each year of membership is a part of the length of service and the pension is calculated from the final salary.

In the CARE scheme the future pension earned so far depends solely on the CPI increases.

System

martin907 wrote: »

Hi,
I wonder if anybody can help out with an explanation of what I see in the Local Government Pension Scheme Modeller.

I have written twice to my Pension Fund administrators at Rhondda Cynon Taf Council about this but they haven’t given me the courtesy of replying.

I am a 57 year old man and 18 months ago I took up an full time administrative job with a local Further Education college after spending some years in self-employment. I and my employer pay the standard monthly contributions into LGPS.

My question is fairly simple and probably one of terminology but try as I may, I cannot find the answer anywhere.

I have looked at the LGPS site and used the Modeller to try to work out a rough idea of what I would receive as an annual pension from this job at various yearly points up to 10 years when I would hope to retire.

The old pre-April 2014 LGPS calculator showed an expected annual pension but this modeller shows what it describes as a “Pension Account”. Is this is the figure that I could expect as a yearly pension, or does it mean something else? If it does mean something else, is there a way of getting an approximate yearly pension figure. I realize that the final figure can never be exact and will be dependent upon a number of variables but it would be good to know a rough figure.

Hiya

I will assume lots of things, so correct them up as we go along...

If you are in the new 2014 scheme then you get 1/49 of your pay as a pension.

So

Year 1

£24,000 salary divided by 49 is £489.80.

This increases with inflation each year, so a modeller to project forward is a bit tricky. But we apply 1.5%

Year 2

Pay increase of 1% give £497.14 this also has CPI of 1.5% applied.

Running total £1006.71


etc etc.

#########
http://lgps2014.org/pensionaccount/
How does a Pension Account build up?

YearOpening BalancePension built up in yearTotal Account 31 MarchCost of LivingUpdated Total Account1£0.00£489.80£489.80£7.35£497.142£497.14£494.69£991.84£14.88£1006.713£1006.71£499.64£1506.36£22.60£1528.954£1528.95£504.64£2033.59£30.50£2064.095£2064.09£509.68£2573.78£38.61£2612.386£2612.38£514.78£3127.16£46.91£3174.077£3174.07£519.93£3694.00£55.41£3749.418£3749.41£525.13£4274.54£64.12£4338.659£4338.65£530.38£4869.03£73.04£4942.0710£4942.07£535.68£5477.75£82.17£5559.92
########

Quite obviously future pay increases and inflation figures are wild guesstimates, but you could create a simple spreadsheet of your own to track your own amounts.

martin907

Thanks for the replies, but my confusion is in what that running total represents. If I were to use the starting salary, the CPI and the pay increase percentages used in JohnDoughs example, after 10 years the modeller shows a Total Account of £5559.92. Is that the figure that I would expect as an annual pension or does it represent something else.

As I said, I do appreciate that there are variables that may influence things but all I am really looking for is an understanding of what the Total Account means.

AlanP_2

It looks like the estimated Annual Pension amount to me and is not that far out from my Excel calculations for mine.

System

Hi

Very loose interpretation.

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The annual pension is 489.80 earned/created in year 1.

This is increased by CPI.

This would be paid on retirement at the rate of 40.80 for life.

End of year 2 the value has increased to £1002 which would pay out at 83.50 per calendar month for the rest of your life.

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Very loose because I don't think the LGPS is sustainable in it's present form.

martin907

Thanks for the explanation, so the amount shown in the modeller is the annual pension.

Why do you think the scheme is not sustainable?

System

Hi

Well there was a mention by a firm of actuaries along the same lines.
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LGPS in its old form has to be maintained. No employee contributions, only employer.

AND the employer has to pay into the new format as well.

It will be interesting to see if the "fully paid up" amounts for the old scheme will change significantly.

Some Local Authorities were on a 20 year repayment plan to achieve fully funded status by 2030. Their liabilities will decrease as LGPS pensioners die off, and perhaps some transfers out.

If investment returns are in double figures, 12% and upwards, then this revenue stream will help to offset employer rates.

#############

Some academies had guaranteed funding for 7 years, their liabilities go waaaaayyy beyond that.

Some of the academies paid their top people almost as much as the PM. If the academies revert to local authority control, their will be a massive deficit for the council tax payer to clear up.

#####

All in all my view is that the current one is unsustainable, replacing the 2008 scheme that was viable for the forseeable future (2030 comes to mind).

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Currently got Man Flu so I am only at 20% efficiency.

AlanP_2

Totally confused by this statement I must admit?


I am in the LGPS (2008 and now 2014 schemes) and pay a percentage of my salary in as does my employer.

I wasn't in the pre-2008 scheme but my wife was and I am pretty sure she contributed then as well.

Academy staff may not be in the LGPS but in a teacher's scheme.

greenglide

I assume the statement means that the 2008 scheme receives no employee contributions because the contributing members are now all in the later schemes.

Alternatively he may be confused with the Teachers or University schemes.

hyubh

People employed by an academy are eligible (and auto-enrolled) on the same basis people who work in local authority maintained schools are - teachers (including the headteacher) in the TPS, support staff (cleaners, caretakers, teaching assistants, etc.) in the LGPS. The highest paid member of the LGPS working at a school, regardless of how the school is funded, is likely to be the bursar (or equivalent), who won't be earning anywhere near the PM, notwithstanding the fact she will likely be earning a lot more than most other support staff.

Funnily enough, given the way the CARE scheme is structured, from the pension funds' point of view it would actually be quite good for school employees in the LGPS to receive a massive uniform pay rise, because it would mean they would all enter noticeably higher contribution bands - with a few exceptions, school support staff are typically both part time and on low rates of pay, falling under the lowest band as a consequence.