LGPS Early Retirement Advice needed

hope2018

Hi I could do with a little advice please, my husband is 55 next year & would like to take early retirement, he has a Local Government Pension, it’s a Defined benefit: Career average revalued earnings (CARE) scheme I’m sure you will need more information to give advice but I’m not sure what. I'll try to answer any questions you will have in order to offer advice.

We need to know our best course of action should we transfer the pension so that we can take advantage of the the drawdown, we would like pay our mortgage off just under £50k

I have an endowment due in 2019 my last statement gave a projected final amount of £22,400.00 assuming future growth of -0.50% each year

I work part time and am happy to continue doing that as I don’t have a pension of my own I’m 56, however if we could manage financially my husband would be happy for me to retire at the same time as him.

I know we need to see a financial advisor, I want to be prepared before we book an appointment, how does one go about selecting the best paid for financial advice, this is a requirement of the LGPS that advice must be taken, which I agree with but how to choose the best for the job is my problem. Any advice on what questions & or information a financial advisor will need will be gratefully received.

Thanks in advance
Hope

Silvertabby

Hi I could do with a little advice please, my husband is 55 next year & would like to take early retirement, he has a Local Government Pension, it’s a Defined benefit: Career average revalued earnings (CARE) scheme I’m sure you will need more information to give advice but I’m not sure what. I'll try to answer any questions you will have in order to offer advice.

At his age, his Rule of 85 protections (if any) will only apply to his pre 2008 service. He will take a heavy hit with his early retirement reductions.
What are his dates of service?

I know we need to see a financial advisor, I want to be prepared before we book an appointment, how does one go about selecting the best paid for financial advice, this is a requirement of the LGPS that advice must be taken, which I agree with but how to choose the best for the job is my problem. Any advice on what questions & or information a financial advisor will need will be gratefully received.

You only need to seek independant financial advice if you want to transfer your benefits out of the LGPS and into a private pension scheme. Is that your plan?

hope2018

Silvertabby wrote: »

At his age, his Rule of 85 protections (if any) will only apply to his pre 2008 service. He will take a heavy hit with his early retirement reductions.


You only need to seek independant financial advice if you want to transfer your benefits out of the LGPS and into a private pension scheme. Is that your plan?

What are his dates of service?
Joined 2008 & will be in it until retirement

Yes, we think so, that's why we need advice we think it will be the best option

Thank you Silvertabby

kidmugsy

hope2018 wrote: »

... my husband is 55 next year & would like to take early retirement, he has a Local Government Pension, it’s a Defined benefit: Career average revalued earnings (CARE) scheme ...We need to know our best course of action with the drawdown, we would like pay our mortgage off just under £50k. I have an endowment due in 2019 my last statement gave a projected final amount of £22k or so in 2019. assuming future growth of -0.50% each year

(i) Taking a DB pension isn't normally referred to as a drawdown: do you perhaps mean that he can choose to take some of it as a tax-free lump sum?

(ii) If your mortgage is cheap enough there may be no compelling reason to hurry to pay it off. When does it end naturally?

hope2018 wrote: »

I work part time and am happy to continue doing that as I don’t have a pension of my own I’m 56, however if we could manage financially my husband would be happy for me to retire at the same time as him.

Two suggestions

(a) Consider urgently whether you should pay as much as possible into a personal pension for yourself. You face the prospect of years without income so that money you withdraw from a personal pension would presumably be free of income tax. Hurray! You might even consider while you are both in work remortgaging for a bigger loan so that you can afford to contribute to the pension. After all you expect to pay off £22k in 2019.

Arithmetic: you contribute £100. Even though you may not pay income tax, the provider claims £25 tax relief from hmrc. Result: you can withdraw 25% of £125 as tax-free lump sum and the rest as income but presumably taxed at 0%. Bliss!

Size of "net" contribution i.e. the amount you pay to the provider: 80% of your annual earnings (which you will know late in the tax year e.g. in March), or £2880, whichever is bigger. You can carry on doing this even after you've stopped working.

(b) Consider having your husband ask for a quotation for a cash equivalent transfer value (CETV) from LGPS to a personal pension for himself. Then you can show the figure to your IFA for his appraisal. Mind you he's likely to say "don't even think of it" (unless, for example, your husband has health worries) but it would still be sensible to ask for the quotation.

Quite uncalled for personal suggestion: don't chuck in your job until you've had a few months of your husband being retired. After all, he may change his mind and seek part-time work of his own.

hope2018

kidmugsy wrote: »

(i) Taking a DB pension isn't normally referred to as a drawdown: do you perhaps mean that he can choose to take some of it as a tax-free lump sum?

(ii) If your mortgage is cheap enough there may be no compelling reason to hurry to pay it off. When does it end naturally?

Two suggestions

(a) Consider urgently whether you should pay as much as possible into a personal pension for yourself. You face the prospect of years without income so that money you withdraw from a personal pension would presumably be free of income tax. Hurray! You might even consider while you are both in work remortgaging for a bigger loan so that you can afford to contribute to the pension. After all you expect to pay off £22k in 2019.

Arithmetic: you contribute £100. Even though you may not pay income tax, the provider claims £25 tax relief from hmrc. Result: you can withdraw 25% of £125 as tax-free lump sum and the rest as income but presumably taxed at 0%. Bliss!

Size of "net" contribution i.e. the amount you pay to the provider: 80% of your annual earnings (which you will know late in the tax year e.g. in March), or £2880, whichever is bigger. You can carry on doing this even after you've stopped working.

(b) Consider having your husband ask for a quotation for a cash equivalent transfer value (CETV) from LGPS to a personal pension for himself. Then you can show the figure to your IFA for his appraisal. Mind you he's likely to say "don't even think of it" (unless, for example, your husband has health worries) but it would still be sensible to ask for the quotation.

Quite uncalled for personal suggestion: don't chuck in your job until you've had a few months of your husband being retired. After all, he may change his mind and seek part-time work of his own.

i) we were wondering if it would be worth taking the pensions & transferring it to another scheme that did allow drawdown, thank you for pointing that out I'll amend my previous post

ii) We have about ten years left to pay, I think we just don't like to owe anything, I'll into look at what you have suggested.

A. That sounds like a very sensible plan thank you
B. I'm going send of for the quote now

Mmm I know what you mean, he has pondered the idea of doing a bit of part time work on a self employed basis, but I guess that's another thread Thank you kidmugsy

xylophone

Remember that if he wants to transfer out of his DB pension and the value of the benefits is greater than £30,000, advice from a Pension Transfer Specialist will be required.

http://www.pruadviser.co.uk/content/knowledge/technical-centre/pension_transfer_conversion/

https://www.royallondon.com/Global/documents/GoodWithYourMoney/COMPANY-PENSIONS-FIVE-REASONS-TO-TRANSFER-OUT-AND-FIVE-REASONS-NOT-TO.pdf

atush

hope2018 wrote: »

i) we were wondering if it would be worth taking the pensions & transferring it to another scheme that did allow drawdown, thank you for pointing that out I'll amend my previous post

ii) We have about ten years left to pay, I think we just don't like to owe anything, I'll into look at what you have suggested.

A. That sounds like a very sensible plan thank you
B. I'm going send of for the quote now

Mmm I know what you mean, he has pondered the idea of doing a bit of part time work on a self employed basis, but I guess that's another thread Thank you kidmugsy

I would definitely look into A as a matter of urgency, and have him look at running a DC pension alongside- that way it could pay for a year's early retirement on its own- if he transfers out or not.

Silvertabby

What are his dates of service?
Joined 2008 & will be in it until retirement

As he joined after 2006 he has zero R85 protections.

i) we were wondering if it would be worth taking the pensions & transferring it to another scheme that did allow drawdown, thank you for pointing that out I'll amend my previous post

As he has post 2014 service then he can take his LGPS benefits from 55 - BUT they would be subject to approx 45% reduction for early retirement. Also, he doesn't get an automatic lum sum - if he wants tax free cash then he would have to give up some of his already reduced pension at a rate of £1 annual pension for each £12 of tax free cash,

hope2018

Silvertabby wrote: »

As he joined after 2006 he has zero R85 protections.

As he has post 2014 service then he can take his LGPS benefits from 55 - BUT they would be subject to approx 45% reduction for early retirement. Also, he doesn't get an automatic lum sum - if he wants tax free cash then he would have to give up some of his already reduced pension at a rate of £1 annual pension for each £12 of tax free cash,

would it be possible to transfer the whole pot to somewhere without loosing a huge chunk but still be able to maybe drawdown a tax free sum of £25,000 I think?

kidmugsy

hope2018 wrote: »

would it be possible to transfer the whole pot to somewhere without loosing a huge chunk but still be able to maybe drawdown a tax free sum of £25,000 I think?

The problem with transferring isn't that you expect to lose a huge chunk it's that you lose the guaranteed inflation-protected income. Instead you have to shoulder all the investment risk. The question is whether the CETV will be big enough to justify your taking the gamble of assuming all that risk. Probably not but the decision is yours.

But, yes, once the transfer is done and age 55 is passed then you can draw down 25% tax-free. I see that you still hanker to pay off that mortgage.

Silvertabby

You can take 25% of your notional LGPS benefits through commutation.

Your husband's LGPS provider won't be able to supply a guaranteed CETV (cash equivalent transfer value) before he leaves and his pension account has been finalised - but it's worth asking for an estimate.

Then you can compare the CETV with the LGPS pension if taken at 55.