Unlikely to get close to qualifying for pension, best options?

Lungboy

I'm 37 and only have 6 or so full years towards my state pension due to extended time at university as a student. I have a full time job with a LGPS pension. I also have a chronic deteriorating health issue which means I'm very unlikely to get close to 35 years for the state pension and my workplace pension is likely to be too small to survive on. I am utterly clueless about pensions, so what are the best options for me to build up something reasonable?

GunJack

1. keep working & paying NI (for sp)
2. stay in local govt and therefore the LGPS

even with 30 yrs, this will be a very good basis for retirement

jamesd

It seems likely that you will qualify for the full flat rate state pension. You're at most only 29 years short and it's at least thirty years until your state pension age.

First check your state pension forecast online if you haven't already, because you may not have counted three years of automatic "juvenile credits" that young people get while in education. There is a link just below the main amounts part that takes you to a list where you can see the qualifying or not qualifying result for every tax year.

You may find that you can buy some of the past six years. That could be a good move to get you some extra safety margin.

People on means tested and a range of other benefits automatically get credits for each week of their claim. This is what will protect your accrual of credits towards the full amount whenever your health ends up preventing you from working.

You may be able to claim ill health early retirement at full work pension level from LGPS whenever permanently forced by ill health to stop working. It's likely that you would still get benefits that provide NI credits.

As well as LGPS you can make contributions into a personal pension. As much as you like up to your pay minus the increase in LGPS pension value each tax year, subject to a £40,000 cap.

Lungboy

Thanks both. My worry is that my health could drop off a cliff in, say, 10 years. If I get written off on health grounds what happens? I thought you took abig hit if you take your pension early, so paying in to a private pension could be very expensive, is that wrong?

marlot

There will be some ill health provision in the LGPS - worth checking out.

hyubh

Lungboy wrote: »

My worry is that my health could drop off a cliff in, say, 10 years. If I get written off on health grounds what happens? I thought you took abig hit if you take your pension early

You are ignoring the LGPS' ill health provisions, as jamesd noted. Ill health retirements won't just be granted willy-nilly, but the tiered structure (with tier 3 ill health pensions being stoppable and reverting to a preserved benefit) increases the chances of something:

http://lgpsmember.org/tol/thinking-leaving-illhealth.php

Or, if you have already left (scroll down):

http://lgpsmember.org/arl/already-left-when.php

In your situation I'd say this is a key part of the overall package.

jamesd

Lungboy wrote: »

Thanks both. My worry is that my health could drop off a cliff in, say, 10 years. If I get written off on health grounds what happens? I thought you took abig hit if you take your pension early, so paying in to a private pension could be very expensive, is that wrong?

It's right if you voluntarily choose to do it. It's wrong if forced by ill health, in that case you can get as much as your full accrued to date LGPS pension at any age. Given a chronic and deteriorating condition it seems likely that you would qualify for the full tier 1 level.

This is a standard feature of just about all defined benefit pensions in the public and private sector, though there's lots of variation in how big the payments are.

Working in the public sector was a really good choice for you.

Lungboy

Ok, so the LGPS is still a goer, but I should essentially write off my state pension? No point in trying to buy the 6 partial years I'm allowed to buy?

GunJack

Lungboy wrote: »

Ok, so the LGPS is still a goer, but I should essentially write off my state pension? No point in trying to buy the 6 partial years I'm allowed to buy?

not really, as they won't add to your starting amount as at april 2016...

Lungboy

I'm guessing there's no way to opt out of the state pension in favour of additional payments to my LGPS?

antrobus

Lungboy wrote: »

.... I also have a chronic deteriorating health issue which means I'm very unlikely to get close to 35 years for the state pension ...

It depends on what you envisage happening after this chronic deteriorating health issue prevents you from working. Where you to get ESA, you would also get Class 1 credits, and they count towards your state pension.