Pension Type

Grazzier

I am told that one of the pensions I have is called a "Defined Benefits" pension. This is one that is with a local Authority and was active when I worked for them. I no longer work for them. The Pension isn't large. I am told because of the type of Pension that it is that I am unable to withdraw it all as a single lump sum - it would have to be a "Defined Contribution" pension in order to do that - but my queries are two-fold: A) since I had contributed to it via a direct take from my monthly salary whilst working for and salaried by them why isn't it a contribution pension ? Can the Defined Benefits pension still be taken and transfered to another external company from the Local Authority and then can I withdraw it a single lump sum ? (or do local authorities have some Government special rules that dont allow this ?)
Thanks to all who consider.

jem16

Grazzier wrote: »

A) since I had contributed to it via a direct take from my monthly salary whilst working for and salaried by them why isn't it a contribution pension ?

The LGPS is a Defined Benefit pension in that at retirement you have a set of guaranteed benefits paid out to you. Yes you made a contribution to this as with most pensions but that's immaterial to the type of pension.

Can the Defined Benefits pension still be taken and transfered to another external company from the Local Authority and then can I withdraw it a single lump sum ? (or do local authorities have some Government special rules that dont allow this ?)
Thanks to all who consider.

As the LGPS is a funded scheme it can be transferred to a Defined Contribution scheme although you may need the advice of an IFA if the transfer value is over £30k.

However this course of action is very unlikely to be in your best interests as only around 1 in 10 of such transfer are.

How much is the pension likely to pay out?

hyubh

Grazzier wrote: »

I am told that one of the pensions I have is called a "Defined Benefits" pension. This is one that is with a local Authority and was active when I worked for them. I no longer work for them. The Pension isn't large.

If it is genuinely tiny it may be drawable in full as a 'trivial commutation' from your state pension age. If I had to guess I'd say that the conditions for this probably don't hold in your case however.

A) since I had contributed to it via a direct take from my monthly salary whilst working for and salaried by them why isn't it a contribution pension ?

Jargon, jargon Your LGPS pension was indeed 'contributory', but was/is not a 'defined contribution' pension because your pension benefits are defined by the scheme rules, not the realisable value of your (invested) contributions.

Can the Defined Benefits pension still be taken and transfered to another external company from the Local Authority and then can I withdraw it a single lump sum ?

Yes, but as jem16 says, pending knowledge of any special circumstances this would unlikely be in your best financial interest.

(or do local authorities have some Government special rules that dont allow this ?)

No, you have a statutory right to transfer out unless very close to your normal retirement age in the scheme.

System

Hi

Whilst you have a DB (DB is either a Defined Benefit, or in other circumstances a PB Preserved Benefit/Deferred Benefit).
Yes I know that PB is the chemical symbol for Lead, but in the case of the LGPS the Daily Mail et al would have us believe that a PB in the LGPS is actually GOLD(Au) Plated.

So you have a DB*2 (Deferred Benefit in Defined Benefit Scheme;~))

This means that should you become incapable of work before normal retirement age:-
Your pension would paid immediately.
If you die there would be benefits to any surviving partner.
Possible payment of a pension to children in education.

You should be getting Annual Benefit Statements outlining the amount of benefit you have accrued, and the amount it has increased since leaving, Index Linked to CPI now. Which will continue, probably for your lifetime and that of any surviving partner.

All of this, and much much more, is why the usual answer to transferring out of the LGPS is NO, not never ever.
But for a small percentage it may be prudent.

So think carefully about long term security and short term gain.

xylophone

http://www.lgps2014.org/content/deferred-benefits

http://www.lgps.org.uk/lge/core/page.do?pageId=101769

Grazzier

Thank you all for your considerations and useful advice.

Super !