Combine LGPS or not

daisy19

Hello

I have a deferred LGPS which I left in 2013. I have rejoined the same LGPS and have to make a decision about whether to combine the deferred one with my current one and if so which of two transfer options to choose.

The deferred amount is not a large pot as I was only in that job for just over a year. My current salary (full time) is slightly higher than the deferred whole time pensionable pay of the deferred one.

I am struggling to decide between the two transfer options:

1st option is to combine my deferred benefit with my current active pension account so that it continues to count as final salary scheme membership.

2nd option is to combine but to buy an amount of earned pension in the career average scheme which will be added to my current active pension.

3rd option is to keep deferred one separate.

I am leaning towards the first option mainly because my current salary is slightly higher. However, would appreciate some advice from those with a better knowledge of LGPS.

Thanks in advance.

hyubh

daisy19 wrote: »

I have a deferred LGPS which I left in 2013. I have rejoined the same LGPS and have to make a decision about whether to combine the deferred one with my current one and if so which of two transfer options to choose.

The deferred amount is not a large pot as I was only in that job for just over a year. My current salary (full time) is slightly higher than the deferred whole time pensionable pay of the deferred one.

It it still slightly higher if you take into account inflation between 2013 and now? This won't be much, but you should increase the old FTE salary by about 5% to make it directly comparable (i.e., multiply the old FTE by 1.05, and then compare - left deferred, the old pension increases by CPI each year).

I am struggling to decide between the two transfer options:

1st option is to combine my deferred benefit with my current active pension account so that it continues to count as final salary scheme membership.

2nd option is to combine but to buy an amount of earned pension in the career average scheme which will be added to my current active pension.

3rd option is to keep deferred one separate.

I am leaning towards the first option mainly because my current salary is slightly higher.

Getting a figure for option 2 would be useful. In essence, to compare against option 1, you would then need to think in terms of how far your full time equivalent salary will outpace CPI (i.e. inflation), while you stay in an employment with LGPS membership... then take a bit off option 2 given it will produce benefits with a slightly higher normal pension age than option 1 (SPA not 65).

If (for sake of argument) option 2 buys you £1000 additional CARE pension and option 1 gets you a £700 final salary pension as at now, then if you got a couple of promotions before leaving in (say) 10 years, that £800 will probably have increased in value (due to the much higher rate of pay) beyond the £1000. Conversely, if you stayed 10 years but without any promotions, then the likelihood of inflation-busting pay rises causing option 1 to overtake option 2 seems much smaller to me (if you are with a local government employer, then presumably you are on a scale point system, however it doesn't take long to max out on a grade).

daisy19

Thank you for taking the time to reply.

The figure they have given me for option 2 is £487 additional earned pension. Option 1 annual pension is apprx £491.

I calculated the old FTE salary by 1.05 and it is still slightly less than my current salary but only by a few hundred pounds.

In terms of future earnings, I cannot see my salary rising considerably over the foreseeable future other than the scale point system.

You are probably thinking what am I worrying about with such small sums but it's all so confusing!

Thanks again.

Toddy2

I was in a similar position to you with 14 yrs previous then rejoining after an 8 yr gap. I opted to defer mine as it falls under the 85yr rule and I can draw without penalty at 60. Is any of your service pre 2008?

Silvertabby

It's not clear cut, but if you are sure that your current salary won't rise by more than inflation then you could leave your first pension deferred and take it unreduced at 65 (even if you are still working).

However, with just over a years service, whatever you do with it won't be life changing.

daisy19

Thank you Toddy2

This one isn't pre-2008.

I do have a few that are so I am leaving them where they are!

daisy19

Thank you Silvertabby

Indeed, alas not life changing!