Pension values

Scumhater

I have two local government pensions, one of which I'm currently paying into and have been for around ten years, and another from a previous job that is deferred. I can opt to take one or both when I'm 60, in five years' time. My state pension won't be payable until I'm 66. I'm currently working part-time and don't anticipate increasing my hours or wages significantly before retirement.

I've been looking at my LG pension statements and trying to work out whether I can afford to take any of my pension now. What I'm trying to predict is how much they'll be worth down the line. So my question is: Is it reasonable to assume the value of my LG pension pot and state pension will be similar to now, relative to wages/inflation etc?

greenglide

Whether the LG pension will grow will depend on how it is invested and what happens to such investments in the future. An overall assumption that it will keep up in real terms, allowing for inflation, over the long term would be reasonable. Over a couple of years is anybodies guess.

The future value of the State Pension is subject to politics. At present it increases by the triple lock and low inflation means that the 2.5% part is generous, whether the triple lock will continue if inflation stays low is anyones guess. An assumption that it will keep pace with CPI (not RPI) is reasonable.

But you will need a safety margin?

kidmugsy

greenglide wrote: »

Whether the LG pension will grow will depend on how it is invested and what happens to such investments in the future.

Really? I had assumed that LGPS pensions are DB.

chiefie

kidmugsy wrote: »

Really? I had assumed that LGPS pensions are DB.

It is

It will go up in line with cpi (the exact rules you can find on the lgps website)

If you are thinking of transferring to a dc you can do but you will need to get an ifa to sign this off if it is worth more than £30,000

greenglide

Doh!

I thought that the reference to "LG Pension" was referring to another scheme which was a DC scheme in addition to the LGPS ones - it mentioned the dreaded word "pot".

Exits with head bowed ................................

hyubh

Scumhater wrote: »

I have two local government pensions, one of which I'm currently paying into and have been for around ten years, and another from a previous job that is deferred. I can opt to take one or both when I'm 60, in five years' time.

When you say 60, do you mean the earliest age for a voluntary retirement with actuarial reductions? If so, then if you're in England or Wales then it's actually 55 for your current membership (went down last April), though typically it's not sensible to draw the pension early like that. Alternatively, do you mean 60 with rule of 65 protections? If you did, then on the face of it you'd only get limited benefit from the 85 year rule for your current membership however. That said... if you don't know where you stand on the 85 year rule (or for that matter, haven't heard of it before), it's definitely something to check with the administrator(s) for both your memberships.

My state pension won't be payable until I'm 66. I'm currently working part-time and don't anticipate increasing my hours or wages significantly before retirement.

If your rate of pay doesn't keep up with CPI then the value of the pre-April 2014 service (England or Wales)/pre-April 2015 service (rest of the UK) in your current membership will actually fall in real terms. On the other hand, the last CPI figure was 0% last month, so that may be academic in practice.

What I'm trying to predict is how much they'll be worth down the line.

Deferred benefits, pensions in payment, and previous CARE accruals for active members are all increased by CPI every year in the LGPS.

Scumhater

So many terms and complications! My head's spinning.

The good thing is I work for a local authority that seems to have managed itself fairly well through the recession in comparison to many. They pay in line with national payscales so I think it's fair to assume pay rates will pretty much keep up with CPI over the next 5-10 years.

LGPS actually has a calculator that shows what you'll get if you take benefits at different times and it seems to show that, with my husband's pensions taken into account, we could actually be better off when we retire than we are now, hence my question. If I can take some of it now without affecting that too much then it could be worth doing.

More homework, I think.

Thank you all.

Scumhater

I have just noticed that my pension record shows a service break of one day when we came out on strike. How much does this affect things?

hyubh

Scumhater wrote: »

I have just noticed that my pension record shows a service break of one day when we came out on strike. How much does this affect things?

One day less of service. Assuming this was in November 2011 (maybe it wasn't), this will come out of your total final salary reckonable membership. The effect will be negligible in monetary terms - if your total pre-April 2014 service was 10 years exactly, then the strike day will just make it 9 years and 364 days.

That said, you would have had the opportunity to buy the strike day back at a rate of 16% your lost pensionable pay for the day.

Teaandscones

I would check as hyubh suggested whether your deferred pension benefited from the rule of 85 or not. Assuming this relates to service started before 2006 and relates to service before 1st april 2008, then it is your age when taken plus years service plus years since you deferred it. So if someone has 15 years service is aged 60 and left that employment 12 years ago, it is 60+15+12=87 which is greater or equal to 85 so qualifies.

Note that the rule of 85 only takes effect from age 60 so that if you voluntarily retire before then it has no effect. Your pension administrator can give definitive advice regarding your exact position.

I would suggest that if the rule of 85 is satisfied and your deferred pension relates to a separate employment, it may be to your advantage to take that at age 60 but leave your current pension until age 65/66 because otherwise it will take a large actuarial reduction of approx 25%

Scumhater

Well, it's all academic now. Apparently I can't claim any of my deferred pension until I'm 60 because I left the job before April 2014, and I can't take any of my active one unless I take flexible retirement. Given that I already do just 15 hours a week, that's not going to be a viable option.

Ah well ... back to planning the bank job, I guess.