Amalgamating NHS and LGPS pensions

slider18

I currently have three separate pensions and am considering combining the three but am not sure this is in my best interests. My first pension is a Local government pension from 1987 - 2003. I then have an NHS pension from 2003 to 2014 and the third is back with the LGPs from 2014 to the present day. Ideally I would like to retire in 5 years at age 60.

I do intend to amalgamate the two LGPS pensions but my query is about bringing across the NHS pension. On the NHS statement of entitlement they are saying it is worth 10 years and 303 days with a value of £132,553. This the LGPS state would give me an additional £10,571 per year to add to my LG pension. (no lump sum) If i leave it where it is it i would get a lump sum of £19,550 and a annual sum of £6,500. I would however be able to claim this at age 60 without reductions whereas if i move it to the LGPS i would have to take a reduced rate as the normal retirement age is 65. I am earninhg more now that at any point beofe and this I intend to stay in the same post till i retire whiuch will privde a number of furthe incrumental pay rises. I am finding this all really confusing. I have tried to use the online calculator but not sure how accurate this will be. Added to this i still done know what the combined benefits will be of the two LGPS

Hope someone can offer some pointers

Silvertabby

Are your two LGPS pensions with the same local authority? If they are, then you don't need to do anything. You may have two separate records with them, if that is in your best interests - ie, if your leaving salary in respect of your first post (with cost of living increases) is higher than your current salary. Same principle would apply if your LGPSs are with 2 different local authorities - combining them may not be the best deal.

If you can post your leaving salary and your exact date of leaving in 2003 I'll uprate the salary for you. Another point to consider is that you would be able to take your first LGPS benefits at 60 with no or very little reductions for early payment if you didn't combine them.

slider18

HI

Yes both the LGPS are with the same authority and yes i do have two separate records with them.

My salary at the point of leaving on 31 May 2003 was £28,824

My current salaryy is 57k rising to 63k at the point in intend to retire.

thanks

xylophone

Should it be relevant to you, LGPS can be transferred out to DC, NHS usually can't.

hyubh

slider18 wrote: »

I currently have three separate pensions and am considering combining the three but am not sure this is in my best interests. My first pension is a Local government pension from 1987 - 2003. I then have an NHS pension from 2003 to 2014 and the third is back with the LGPs from 2014 to the present day. Ideally I would like to retire in 5 years at age 60.

An aside, but I'm mildly surprised you're being allowed to do this. The default deadline is 12 months from starting the current employment. While there is an employer discretion to extend on the LGPS side, Club transfers have (or at least had) a fixed 12 month limit.

slider18

HI hyubh

I think they are allowing it now as i have complained. I initially requested to do this when i rejoined in 2014, they said they would do it and didn't. I then asked again in 2015 and they still didn't get on with it so i complained in September last year and here we are now. I put my request in writing so and they responded so i had evidence to support the complaint

Silvertabby

HI

Yes both the LGPS are with the same authority and yes i do have two separate records with them.

My salary at the point of leaving on 31 May 2003 was £28,824

My current salaryy is 57k rising to 63k at the point in intend to retire.

thanks

£28824.00 uprated from 31 May 2003 is £40664.90. When did you re-join the LGPS? If it was after 1 April 2014 that will explain why they didn't combine your records, as you would have joined under career average terms rather than final salary.

slider18

Sorry i don't know what you mean by uprated to £40,664

I rejoined the LGPS on 1 April 2014

I am concerned that i would lose out by combining both LGPS as, as you point out, they would be amalgamated under the career average. From my discussions with the LGPS they seem to suggest any losses may be offset by the fact that i earn quite a bit more now

Silvertabby

Sorry i don't know what you mean by uprated to £40,664

I rejoined the LGPS on 1 April 2014

I am concerned that i would lose out by combining both LGPS as, as you point out, they would be amalgamated under the career average. From my discussions with the LGPS they seem to suggest any losses may be offset by the fact that i earn quite a bit more now

It's your salary as at your date of leaving uprated to present day - ie, your first LGPS pension is calculated on your final salary £28824.00 plus 13 years of cost of living increases, which equate to a current date of leaving on a final salary of £40664.

As you joined on 1 April 2014, it may not be possible to combine your LGPS records under the new regulations. These regulations were in the process of being re-vamped when I retired last year, so you will need to ask your LGPS if it is possible to combine them (with or without your NHS pension).

Pros and cons of combining:

Pro: The final salary link. If combined, all of your pre 2014 service will maintain the final salary link, and so your first record will be calculated on your final final leaving salary, not £28824.00 plus cost of living increases.

Cons: You wouldn't be able to take your first record benefits at 60 and carry on working.

From what you say, you've already discussed combining your records with you LGPS and they have said that any losses would be offset by your current higher salary, and so it does sound like amalgamation is a possibility. However, they would have assessed that on your current salary, not the much higher salary that you expect to get? The loss they refer to is the fact that if you combine and then retire at 60, then all of your pension would be actuarily reduced for early payment, whereas keeping your records separate would mean that you could take your first record at 60 without any such reductions.

May I suggest that you ask under what conditions your records would be combined, specifically would your earlier record have the final salary link.

kidmugsy

slider18 wrote: »

Ideally I would like to retire in 5 years at age 60. ... my query is about bringing across the NHS pension. On the NHS statement of entitlement they are saying it is worth 10 years and 303 days with a value of £132,553. This the LGPS state would give me an additional £10,571 per year to add to my LG pension. (no lump sum). If i leave it where it is it i would get a lump sum of £19,550 and a annual sum of £6,500. I would however be able to claim this at age 60 without reductions whereas if i move it to the LGPS i would have to take a reduced rate as the normal retirement age is 65.

I suggest you establish the actuarial reduction that would apply if you retired at 60 from your current LGPS scheme, then tell us.

I further suggest that you tell us whether you'd be happy eventually to live off your NHS pension taken at 60, plus current LGPS taken early at 60, plus State Pension. If so, or nearly so, you could consider transferring your old LGPS pension to a DC scheme and using that to bridge the gaps to 65 and to State Pension Age, and to filling any shortfall after SPA.

I also suggest that you tell us whether you'd be happy eventually to live off your NHS pension taken at 60, plus your old LGPS pension taken at 60, plus your State Pension. If so, or nearly so, you could consider transferring your current LGPS scheme to a DC scheme and using that to bridge the gaps to 65 and SPA,and to filling any shortfall after SPA.

if you did decide to transfer out of your current LGPS pension, how much notice would you have to give before retiring?

kidmugsy

slider18 wrote: »

my query is about bringing across the NHS pension. On the NHS statement of entitlement they are saying ... [that this added to] the LGPS state[?] would give me an additional £10,571 per year to add to my LG pension. (no lump sum) If i leave it where it is it i would get a lump sum of £19,550 and a annual sum of £6,500.

OK, if you transfer to LGPS, you give up a a lump sum of £19,550, divided by 0.8 to allow for its being tax-free, and £6,500 p.a. for 5 years. Therefore your loss is £56937.50. Your compensation is an extra (£10,571 - £6500) p.a. from age 65 = £4071 p.a. So you'd have to live for an extra £56937.50/£4071 = 14 years after age 65 to break even. Age 79 is nothing nowadays so the odds favour making the transfer. This all assumes that a tax rate of 20% applies to those annual pensions and that the lump sum can be reinvested in an index-linked, untaxed way, or spent soon after receipt. However you also need to consider drawing the lot at 60, so you need the ARF mentioned in my comment above.