Should i transfer my small pension to LGPS?

Mrs_Blue_Sky

Hi

I cannot afford financial advice so I was hoping for any advice from you guys?

I used to work full time before children, and had a contributory pension with the pension trust, I now work for a school and have been enrolled in a local government pension, which seems like a good pension to be in as it pays death in service to my husband, I only work 20 hours or less a week so am currently paying approx £14 a month in to it

I have been advised that I can transfer my old pension into my new one, but I am unsure whether I should leave it as it is or do the transfer?

The pensions trust has quoted a transfer value of £22914; this apparently would buy an annual pension of £3100 and a contingent spouse pension of £949 into the Local Government scheme

I know my pensions trust pension allowed me to take it in full from age 60 (I am 38) and this one is state retirement age with a reduction on taking early sliding scale with the LGPS pension

I don’t really know what to do; any information or advice would be appreciated

I understand it’s a very small pension really so am hoping the choice should be clear?

GunJack

if your transfer buys that much in lgps, without your contributions, I suspect it will be a no-brainer to transfer in, especially considering all the other benefits of the scheme...

I'm sure someone more au fait with lgps will be along to advise

kidmugsy

GunJack wrote: »

I'm sure someone more au fait with lgps will be along to advise

Hyub knows a lot about LGPS. It might be a good idea to give more info to help him e.g. is it an English scheme you are contributing to? When did you enrol?

Kynthia

I'm guessing that your state pension age is currently 68 and could rise even higher between now and then. So even though the LGPS is very good, so go from getting your pension at 60 to 68 or even later is a big downside.

I don't know much about non-DB pension schemes so others may give better advice. As you're only 38 there's a chance you could stay in the LGPS for quite a while and build up a half - decent pension to claim at state pension age. You'll also get the state pension then too. However are you happy to work until your state pension age or were you hoping to retire earlier? Something I'd be considering then is whether your old pension could fund the gap between when you'd like to retire and when you'd get your LGPS and state pension. Unless you transfer it in and put other plans in place to fund the gap, but would you be able to afford other plans? It could be worth transferring it in as the rate seems very good and then concentrating on funding the gap somehow once your children are older and you're working more hours. What pension does your husband have and would that support you both until state pension age? Just some thoughts.

Mrs_Blue_Sky

Thanks all

Kynthia - You make a really good point , the latest benefit statement from the pensions trust , says that my estimated value of my annual pension at 30th Sept 2037 , which is when i will be 60 , is £2923 , and at 65 is £4364

As it says on the LGPS paperwork , i can retire early but obviously the figures will reduce to reflect early retirement

Current retirement age according to LGPS is 67 and 6 months , if i retired at 60 and 6 months i would lose 31% , obviously if retirement age keeps increasing this will not look any prettier nearer the time?

Kidmugsy - I only enrolled in September last year , there is no automatic lump sum under current regs , at retirement i may be able to give up some pension in exchange for a lump sum, current rate is £12 of lump sum for ever £1 pension given up , and i am based in the home counties

Thanks again guys

hyubh

Mrs_Blue_Sky wrote: »

the latest benefit statement from the pensions trust , says that my estimated value of my annual pension at 30th Sept 2037 , which is when i will be 60 , is £2923 , and at 65 is £4364

A key thing to make clear is whether or not you would be having a Club transfer in which you would be buying a final salary service credit in the LGPS. (A minimum requirement would be that your Pensions Trust pension is itself final salary based.) If not, then what you would get from the LGPS is simply the quoted transferred-in pension figure, uprated by CPI, at SPA - i.e., there would be no salary linking.

On the face of it this would be less than the Pensions Trust pension forgone, irrespective of whether it looks to be a 'good deal' relative to the CETV. However, what exactly an 'estimated value' at NPA means can vary - I would expect most LGPS administrators to adopt a conservative interpretation (which in a deferred case would mean not quoting such a figure in the first place), but practices generally can vary, and it's not clear whether your Pensions Trust benefits are DB or DC (the Pensions Trust operates a range of schemes).

Mrs_Blue_Sky

Hi

I can see from my paperwork from the pension trust that i my pension with them is a deferred benefit pension and is a contracted out of the earnings related component of the state pension scheme

I think by looking at the paperwork that the LGPS is not contracted out

Does this information help ?

Thanks again

greenglide

LGPS is contracted out but only until 5/4/2016 when contracting out ends for everyone.

deferred benefit pension

Do you mean defined benefit?

Mrs_Blue_Sky

I feel confused

I think my Pensions trust pension is defined benefit as there is a warning in my transfer documents about inducements to DC schemes

Is anyone kind enough to give me a list of questions i can ask to both pensions providers so that i can make an informed choice (with your help?)

Thank you

GunJack

Mrs_Blue_Sky wrote: »

I feel confused

I think my Pensions trust pension is defined benefit as there is a warning in my transfer documents about inducements to DC schemes

Is anyone kind enough to give me a list of questions i can ask to both pensions providers so that i can make an informed choice (with your help?)

Thank you

the first thing to establish is what sort of pension the Pensions Trust one is, and confirm the benefits payable and at what age.

I suspect the questions for LGPS will depend on the definitive answers from the PT one

hyubh

Mrs_Blue_Sky wrote: »

I can see from my paperwork from the pension trust that i my pension with them is a deferred benefit pension and is a contracted out of the earnings related component of the state pension scheme

OK, that makes it sound DB (defined benefit) not DC. However, that still leaves the question of whether it would produce a Club transfer to the LGPS or not.

I think by looking at the paperwork that the LGPS is not contracted out

No, the LGPS is contracted out too. Contracting out is about to be abolished completely however, which may be where some confusion has arisen.

Is anyone kind enough to give me a list of questions i can ask to both pensions providers so that i can make an informed choice

Pensions Trust:

- Are the figures quoted for retiring at 60 and 65 in today's money, i.e. without any hypothesised inflation proofing? If not, what are the figures in today's money?

- What are the applicable revaluation rates in deferment, i.e. by what rate does your pension increase until retirement? (Different parts may increase at different rates, e.g. one part RPI capped to 5% and another CPI capped to 2.5%.)

- What will be the increase(s) applicable once you draw your pension? Again, there might be different rates for different elements of the pension. (Ignoring any GMP complications, your LGPS pension will all increase by uncapped CPI.)

Both:

- Will the transfer be under Club terms or not?

LGPS:

- If the answer is positive to the Club transfer question, ask them to confirm that you will therefore be getting a final salary service credit, rather than extra money into your CARE pension account.

- Whether the extra pension quoted is in today's money. (Highly likely it is, but no harm in double checking.)