Offered 2 lump sums??? Help needed please

Michaels_nanny

Hi, I'll try & keep this brief, not waffle on. I'm 61 & just received a statement from my ex employers, Birmingham City Council, Re my pension options. They've quoted 2 lumps sums each with an annual pension, it's not a very big pension, the lumps sums being £3278 & £6469, the latter being 25% of the capital value of my benefits.
This itself has thrown me because when I asked them about cashing my pension 2 figures were not mentioned, does this mean that I can take either option, accepting that my annual pension will be less with the higher amount ? and that also threw me because when I first spoke to them I thought I would just get a lump sum & that would be it, no annual pension.
I had intended to ask if with it being a small amount, compared to others, if I could take the whole capital with no pension, I wanted to go this way because my dad left my mom a tiny pension but having it stopped her getting any help with benefits & she's really struggled. Anyone any idea what my total capital might be?
Thanks in advance
Michaels nanny

dunstonh

I wanted to go this way because my dad left my mom a tiny pension but having it stopped her getting any help with benefits & she's really struggled.

Good job she had the pension then as it would have been worse. Benefits are not reduced by the same amount of the pension.

Anyone any idea what my total capital might be?

Zero as you cant do that.

jem16

Michaels_nanny wrote: »

Hi, I'll try & keep this brief, not waffle on. I'm 61 & just received a statement from my ex employers, Birmingham City Council,

So presumably you are a member of the LGPS? (Local Government Pension Scheme)

Re my pension options. They've quoted 2 lumps sums each with an annual pension, it's not a very big pension, the lumps sums being £3278 & £6469, the latter being 25% of the capital value of my benefits.

That's quite normal. The first lump sum will be the automatic lump sum that you are entitled to along with an annual pension.

The second lump sum gives you the full entitlement of 25% tax free but is obtained by commuting ( ie giving up) some of your annual pension. This is not normally a good idea as the commutation rate is 12:1 which is dire. Unless you have a real need for a lump sum you will be much better off taking the higher pension.

This itself has thrown me because when I asked them about cashing my pension 2 figures were not mentioned, does this mean that I can take either option, accepting that my annual pension will be less with the higher amount ?

Yes you can choose either option but as explained above the higher lump sum is not a good option as you're giving up valuable index-linked pension.

and that also threw me because when I first spoke to them I thought I would just get a lump sum & that would be it, no annual pension.

No you will get both.

I had intended to ask if with it being a small amount, compared to others, if I could take the whole capital with no pension,

The LGPS is a Defined Benefit pension which gives an annual pension plus a lump sum. You cannot choose just to have a lump sum.

I wanted to go this way because my dad left my mom a tiny pension but having it stopped her getting any help with benefits & she's really struggled. Anyone any idea what my total capital might be?

It would have been a very bad idea to take only a lump sum as the pension is much more valuable. You cannot do it anyway unless you transfer the pension away from the LGPS which is very unlikely to be a good decision.

xylophone

http://www.lgps.org.uk/lge/core/page.do?pageId=176901

Does the above cover your situation?

hyubh

Michaels_nanny wrote: »

just received a statement from my ex employers, Birmingham City Council

You'll be a deferred member of the West Midlands LGPS then (http://www.wmpfonline.com).

They've quoted 2 lumps sums each with an annual pension, it's not a very big pension, the lumps sums being £3278 & £6469, the latter being 25% of the capital value of my benefits.

Membership up until April 2008 earned a pension at a rate of 1/80 final pensionable pay and a lump sum of 3/80; membership from April 2008 to March 2014 (earlier if you left earlier, obviously) a pension of 1/60 final salary and no automatic lump sum. The fraction is multiplied by the number of years in the scheme during the years concerned, pro-rated for any part time periods. The first lump sum figure quoted will therefore be the pre-2008 automatic lump sum, the second the biggest lump sum you can purchase by reducing your pension (the rate as jem16 says is 12:1, which is poor from the member's point of view).

This itself has thrown me because when I asked them about cashing my pension 2 figures were not mentioned,

'Cashing in' would mean transferring out first (assuming you're over the trivial commutation limit - looks like you are), which is an entirely different thing to taking a scheme lump sum.

does this mean that I can take either option, accepting that my annual pension will be less with the higher amount?

Yes.

and that also threw me because when I first spoke to them I thought I would just get a lump sum & that would be it, no annual pension.

A wrong assumption.

I had intended to ask if with it being a small amount, compared to others, if I could take the whole capital with no pension,

There's no individual 'capital' - as a DB scheme the assets are collectively held (one pension fund to pay for everyone's benefits).

Anyone any idea what my total capital might be?

You can get a 'cash equivalent transfer value', transfer to a DC scheme, then withdraw the result under recent regulation changes. However, giving up a pension backed by the local council taxpayer that goes up by CPI every year would, on the face of it, be somewhat foolish.

System

Hi

Like everyone has explained, I agree and offer...

The lower lump sum is fixed as 3/80 of your pension, and has an annual pension attached for life (with CPI increases as necessary), with the possibility of a survivors benefit also.

You can increase the lump sum by decreasing your pension, ratio of £1 of pension buys £12 of lump sum, upto the maximum of £6469.00, or somewhere in between. You could ask for a lum of £5000 and reduce your pension accordingly.

The 2 figures are minimum and maximum, you can choose either, or an amount in between.

If you live for another 21 years the minimum amount you will get out of the LGPS is £26,224.00. There is a minimum time for which it is paid, probably 5 years, which is worth £8741.34. Both figures should get increased with CPI, which makes it a very attractive package.

I don't expect you remember how much you paid in @ 6%, but it is certainly less than you will get out.

Imagine drawing that pension for 39 years, being a 100 years old and been paid £45892.00 plus CPI plus state pension (less income tax).

So if you examined moving it, you have some idea of the value you need to achieve.

Michaels_nanny

Thanks to everyone who responded to my query, I must have sounded really dumb but I seriously did know nothing about pensions, always felt that the little I paid in & for such a short time meant I'd get very little back. I am shocked at how much my pension is worth & really kicking myself for not putting more into it when I could have done.
I left my job for ill health reasons, HR tried to get me retired for this but weren't able to. At the time I did not realise the significance of this, my health has not improved it is in fact much worse & I'll be truly grateful should I live to receive a telegram from the Queen.
I'm happy with the pension I will receive & thank you all for leading me in the right direction.
Lesley x

xylophone

Have you obtained a state pension statement?

https://www.gov.uk/state-pension-statement

System

Hi

As a deferred member (or active) you still qualify for consideration as an IHR (Ill Health Retirement).

So if are under pension age and incapable of work thru Ill Health you could apply retrospectively to BCC for an assessment. It may not actually benefit you, but the right exists for all deferred members of the LGPS.

Also make / redo your Death Benefit payment with the LGPS so that any money due goes to those you wish it to.

Expression of Wish money can go to any legal entity, as long as they can be traced, Cats home, Church, Grandchild, Spouse etc etc.