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LGPS - what option should I take - advice please
Comments
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Hyubh - what's your advice regarding the lump sum option?
- Can't reverse commute your 3/80 lump sum, so the question is whether to commute or not
- 12/1 is intentionally poor from the individual member's POV, so if you haven't got a good cause to use extra lump sum for - and you do not have lifetime allowance problems - best not to take it.I thought you could only go under the 85 year rule if you were over 60
Agreed, doesn't sound quite right. Under the CARE scheme there's an employer discretion to remove application of an actuarial reduction before 60 where the magic 85 is reached before that age, but it's not usually taken due to the cost.0 -
Hyubh - what's your advice regarding the lump sum option?
NickC - your post made me smile. I thought you could only go under the 85 year rule if you were over 60 ��
85 Rule is mostly for 60+. However it is not across the board and different professions have different retirement ages.
You sound like you prefer taking the additional lump sum rather than the annual pension? Why are you of that opinion?
The tax implications of pension and additional income are really no different than if all your income was salary. The pension does not incur NIC charges but obviously you will pay tax over your personal allowance. It does also mean that all your salary is subject to tax so with tax and NIC you lose in the region of 26% of the salary. A part-time salary of £10,000 will be whittled down to around £7,500.
Just curious of your thinking and how you see taking greater lump sum would be more advantageous? At 56 and in good health you have a good chance of being around for the next 30 years or so. For every £12k you take in lump sump you would lose around £16K in annual pension after the break even point, if you live to 86.0 -
85 Rule is mostly for 60+. However it is not across the board and different professions have different retirement ages.
The 85 year rule is specific to the LGPS, and it's not 'mostly for 60+' - it's all about an ability to retire some time between 60 and 65 without an actuarial reduction on final salary benefits. It only exists elsewhere in sections of private sector schemes that intentionally mirror the LGPS (or a historical variant of the scheme).0 -
Hyubh - what's your advice regarding the lump sum option?
NickC - your post made me smile. I thought you could only go under the 85 year rule if you were over 60 ��
I got redundancy at age 55 in 2012. Received my pension with no actuarial deductions (but no added years either). I don't know if the rules have changed in the last three years? I could have gone at 60 without redundancy under the 85 year rule.
Your figures are similar to mine, except for your redundancy payment which looks low. Have you asked for PILON? I reduced my redundancy figure to 30K by buying a small amount of added years pension. This is tax efficient.
15 years ago, people were getting full pension with redundancy at age 50 with added years. The rules have certainly changed, and they needed to TBH.0 -
The 85 year rule is specific to the LGPS, and it's not 'mostly for 60+' - it's all about an ability to retire some time between 60 and 65 without an actuarial reduction on final salary benefits. It only exists elsewhere in sections of private sector schemes that intentionally mirror the LGPS (or a historical variant of the scheme).
When I mentioned 60+ it was just that - the ability for someone at 60 or more to retire without actuarial reduction if they met the 85 yr rule.
However, I know that different professions have different ages to which they can retire. Nick_C above commented that he retired at 55 under the 85 yr rule. I'm not quite sure how that works in his specific case or how the equivalent rules in other pensions work.
Other public sector schemes will have their own version of it.0 -
I am worried about the tax implications of receiving a pension and additional income, but not sure which forum thread to post any questions!
Have a play with http://www.thesalarycalculator.co.uk/salary.php
With a salary of £46K and LGPS contributions at 8.5%, your net is currently £32,080
With a pension of £19K, no NICs and no LGPS contributions, your net pension should be £17,320
For any new job, you will pay basic rate tax at 20% on your entire earnings, and NICs. If you get a new job paying £20,285, this will gave you net pay of £14,760, giving you the same income that you have now.
If you have one or two part time jobs paying less than £155 per week, then you won't pay NICs. However, you probably want to pay NICs for a few years to maximise your SRP.0 -
When I mentioned 60+ it was just that
Not that it matters, but I was objecting to the word 'mostly'...Other public sector schemes will have their own version of it.
They don't. The 85 year rule is LGPS specific, full stop, partly because the NPAs of (for example) the TPS and PCSPS were historically only 60 anyway (the LGPS, in contrast, has never had an NPA lower than 65).0 -
Not that it matters, but I was objecting to the word 'mostly'...
They don't. The 85 year rule is LGPS specific, full stop, partly because the NPAs of (for example) the TPS and PCSPS were historically only 60 anyway (the LGPS, in contrast, has never had an NPA lower than 65).
Sorry, but that's wrong. Normal retirement/pension age for LGPS used to be 60. I joined LGPS in 1980 and my retirement age was 60. You could work for 40 years and retire on half pay plus a lump sum of 3 times salary.
I'm pretty sure that back in the 90s the 85 year rule was used to determine whether or not you could retire on the grounds of redundancy or efficiency between 50 and 60 and qualify for a pension. I have friends who were made redundant at 50 and got a pension with no deductions. They received no cost of living increases between 50 and 55, but at age 55 the pension was upgraded to the amount that they would have been on if cost of living increases had been awarded. In those days, councils were giving added years to people they were making redundant.
I also think the 85 year rule may have been used for councils' discretionary schemes.
Edit:
I was trying to find a reference to back this up (apart from my own personal documents), and found this on the LGPS web site.Normal retirement age/date
...
If you left the LGPS before 1 October 2006 (before 1 December 2006 in Scotland)
Your normal retirement date is age 65 unless you joined the LGPS before 1 April 1998, when your normal retirement date could be the earlier of:
Your 60th birthday, if you could have got 25 years membership in by then (if you had you stayed in the LGPS until age 60) or
Between age 60 and 65, on the day after the date that you could have completed 25 years membership (if you had stayed in the LGPS until then) or
Age 65
http://www.lgps.org.uk/lge/core/page.do?pageId=1007910 -
Not that it matters, but I was objecting to the word 'mostly'...
Well I don't think it does matter mostly! .... I only used the word mostly as there are no doubt some exceptional circumstances where the 85 yr rule might not apply entirely ..... but it is a red herring.
They don't. The 85 year rule is LGPS specific, full stop, partly because the NPAs of (for example) the TPS and PCSPS were historically only 60 anyway (the LGPS, in contrast, has never had an NPA lower than 65).
I don't know the history of all these schemes ... and it may be that some schemes did not need an equivalent 85 year rule - e.g. for those whose retirement age is/was 50.
I was in the LGPS for 20 years and in that time it had many changes. No doubt others, such as OP with 32 years will have had considerably more changes in that time.0 -
I was trying to find a reference to back this up (apart from my own personal documents), and found this on the LGPS web site.Your normal retirement date is age 65 unless you joined the LGPS before 1 April 1998, when your normal retirement date could be the earlier of:
Your 60th birthday, if you could have got 25 years membership in by then (if you had you stayed in the LGPS until age 60) or
Between age 60 and 65, on the day after the date that you could have completed 25 years membership (if you had stayed in the LGPS until then) or
Age 65
Isn't that just describing the Rule of 85 - ie 60 plus 25 years membership equals 85?0
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