SIPP v LGPS for early retirement

JohnnyJet

I would like to retire about 57 and I am currently contributing to a LGPS which I can take at 67. I also contribute to a SIPP which I plan to start drawing from, this will cover the 10 year gap to 67. Is this the best way to achieve this or should I consider making additoinal payments to the LGPS rather than the SIPP.

hyubh

JohnnyJet wrote: »

I would like to retire about 57 and I am currently contributing to a LGPS which I can take at 67. I also contribute to a SIPP which I plan to start drawing from, this will cover the 10 year gap to 67. Is this the best way to achieve this or should I consider making additoinal payments to the LGPS rather than the SIPP.

An APC would have the same NPA (i.e., your SPA) as your CARE benefits. Ergo, as you're already familiar with managing a SIPP, I'd say the latter is the more obvious option for the aim you've quoted. However, you haven't mentioned your current age. If you have a few decades before retirement, I'd be inclined to sink money into an APC just to bolster the DB side of your pension savings, unless you're really sure you'll be in the public sector (or at least eligible for a public sector pension scheme) to the end.

JohnnyJet

I'm 42 and have no plans yet to leave the public sector, so am basing my plan on this. My problem with adding more to the LGPS is that I want to go before I am 67 so want this under my control. If I contribute to an APC then could I take that part at 57? Would the penalty be too great to consider this?

hyubh

JohnnyJet wrote: »

I'm 42 and have no plans yet to leave the public sector, so am basing my plan on this.

OK.

If I contribute to an APC then could I take that part at 57?

Not separately, no.

maximumgardener

have you thought about making added payments to both your LGPS and your SIPP's

you could split added amount 50/50?

JohnnyJet

maximumgardener wrote: »

have you thought about making added payments to both your LGPS and your SIPP's

you could split added amount 50/50?

Yes I have considered this, just trying to work out the best age to start receiving the LGPS, for example, if I received it 10 years early then I would have a 43% reduction but 5 years early it would be 25%.

Am I right in thinking that for every £860 I add I would get an additional £100 per year? Obviously reduced depending on taking it before 67 and any tax due above the personal allowance.

hyubh

JohnnyJet wrote: »

Am I right in thinking that for every £860 I add I would get an additional £100 per year? Obviously reduced depending on taking it before 67 and any tax due above the personal allowance.

Is this using the APC calculator on the national LGPS members site?

https://lgpsmember.org/more/apc/index.php

If I enter sex as male, DOB as 1/1/74, extra pension (at NPA - currently 67) of £100 pa, pay period as monthly, and length of contract as 10 years, I get £8.60 per month being needed. Extend the number of years to 15 and it goes down to £6.51.

One thing you may wish to keep in mind with this sort of APC, aside from the NPA and inability to take the extra pension separate from your main benefits in the scheme, is the fact it gives no extra survivor's (spousal) pension.

JohnnyJet

Yes it was the APC calculator that you mentioned, didn't realise that it gets less generous every year, but that makes sense now. It still seems good value, unless I have missed something

I may consider adding some additional money to the pension but not too much, I would then have a bigger pot to take a few years earlier which would be guaranteed, any more than a few years and the penalty is too great. I want more control and don't trust the government to make further changes. I can also continue to add to a SIPP. It is the 10 years from 57 to 67 that I am struggling to make a decision on.

atush

I would use a sipp to retire early, and leave your DB pension unreduced.

System

Hi

There are differing parts to the LGPS.

Therefore ask the pension administrators what scheme(s) you are in, and what the scheme retirement age is.

EG:

NORMAL RETIREMENT
Normal retirement occurs at the age the scheme will
pay your benefits without actuarial reduction or enhancement as of right – your Normal Pension Age (NPA).

In the LGPS 2014 instead of your NPA being fixed at 65, it will instead match your individual State Pension Age (SPA), with a minimum of 65.


Protection for pension earned up to the start of the new scheme means that you will still be able to take any benefits relating to pre April 2014 service at 65.


I doubt the Rule of 85 will still apply, but any pre 2014 benefits should be payable at normal scheme retirement age, which was 65.

So please ask, as the pre 2014 may be available earlier and cheaper than you currently think. Then obviously the post 2014 comes in whatever age is current for SPA.

AlanP_2

johndough wrote: »

Hi

There are differing parts to the LGPS.

Therefore ask the pension administrators what scheme(s) you are in, and what the scheme retirement age is.

EG:

NORMAL RETIREMENT
Normal retirement occurs at the age the scheme will
pay your benefits without actuarial reduction or enhancement as of right – your Normal Pension Age (NPA).

In the LGPS 2014 instead of your NPA being fixed at 65, it will instead match your individual State Pension Age (SPA), with a minimum of 65.


Protection for pension earned up to the start of the new scheme means that you will still be able to take any benefits relating to pre April 2014 service at 65.


I doubt the Rule of 85 will still apply, but any pre 2014 benefits should be payable at normal scheme retirement age, which was 65.

So please ask, as the pre 2014 may be available earlier and cheaper than you currently think. Then obviously the post 2014 comes in whatever age is current for SPA.

My understanding is that you cannot split your pot & have to take Pre & Post 2014 elements at the same time.

Take at 65 and suffer a reduction on the Post-2014 CARE element.

Take at "67" ad the Pre 2014 increases in deferment.