LGPS Deferred Pension lump sum

Malchester

Have asked questions before here re taking larger lump sum and lower pension to reduce tax liability - this was based on an assumption I read elsewhere that every £12 extra lump sum reduced my annual pension by £1. Have now received Deferred Retirement Pack which clearly states 'every £18.69 of extra lump sum you take makes your pension go down by £1.' That makes quite a big difference to the calculation and seems a generous figure. Excluding interest on the lump sum, and annual increases to the annual pension it seems to me that it would take 18 years before I let attend to lose out. It is the WYPF (West Yorkshire) LGPS

Any thoughts or comments would be helpful.

Dox

Not quite sure what thoughts/comments you are hoping for/expecting. The rate of exchange can and does vary depending on when a scheme reviews its commutation (rate of exchange) factors, your age etc.

Silvertabby

Malchester wrote: »

Have asked questions before here re taking larger lump sum and lower pension to reduce tax liability - this was based on an assumption I read elsewhere that every £12 extra lump sum reduced my annual pension by £1. Have now received Deferred Retirement Pack which clearly states 'every £18.69 of extra lump sum you take makes your pension go down by £1.' That makes quite a big difference to the calculation and seems a generous figure. Excluding interest on the lump sum, and annual increases to the annual pension it seems to me that it would take 18 years before I let attend to lose out. It is the WYPF (West Yorkshire) LGPS

Any thoughts or comments would be helpful.

The LGPS commutation rate is 1:12. Can you post a bit more of the letter which quotes this mysterious £18.69 - and your before and after pension quotes?

lazyred

WYPF website says you get £12 lump sum for giving up £1 of pension

http://www.wypf.org.uk/Member/Deferred/AboutYourDeferredBenefits/DeferredPensionWorkedOut/DeferredPensionWorkedOut.aspx

Malchester

Thanks Silvertabby. I have deferred LGPS pension as I left after 11 years service. I am one of those small number who have a protected pension age of 60, so get full benefits at 60 with no reductions.

Min lump sum £18887 with £6245 annual pension. Max lump sum is £33345 with annual pension of £5475. I can take any lump sum between the min and max with the annual pension reducing by £1 for every £18.69 I take as extra lump sum.

Like you I have always been under the impression the LGPS commutation rate was 1:12 but my offer is 1:18.69 unless I have misunderstood completely. This seems quite a good offer to me. I have checked the calculation on my letter and it is correct at 1:18.69

Malchester

Lazy red - thanks for your reply. I know the figure on the website but my letter say not 1:12 but 1:18.69

Silvertabby

Malchester wrote: »

Thanks Silvertabby. I have deferred LGPS pension as I left after 11 years service. I am one of those small number who have a protected pension age of 60, so get full benefits at 60 with no reductions.

Min lump sum £18887 with £6245 annual pension. Max lump sum is £33345 with annual pension of £5475. I can take any lump sum between the min and max with the annual pension reducing by £1 for every £18.69 I take as extra lump sum.

Like you I have always been under the impression the LGPS commutation rate was 1:12 but my offer is 1:18.69 unless I have misunderstood completely. This seems quite a good offer to me. I have checked the calculation on my letter and it is correct at 1:18.69

Well, what a puzzle.

Do your figures include AVCs? If yes, that could explain the anomoly - but it's an odd way of showing the commutation rate on your letter. As you are a deferred pensioner, you can't use AVCs to buy extra pension in the LGPS - but AVCs can be taken as tax free cash as long as your AVC fund plus your standard pension lump sum doesn't exceed 25% of your total fund notional value.

I would ring WYPF to query this - I would be very interested in their answer!

Malchester

Thanks again Silvertabby. No AVC's involved. I left local government in 1994 after about 11 1/2 years in the scheme.

I am in two minds whether to leave it and not contact them and just accept they are correct and decide what to do on that basis, or contact them risking the offer being reduced if they are wrong. The offer makes me more likely to take a higher lump sum as it would take me to the age of around 78 to break even.

hyubh

Malchester wrote: »

Lazy red - thanks for your reply. I know the figure on the website but my letter say not 1:12 but 1:18.69

This sounds like you've been quoted a commutation factor for the FPS (West Yorks administer a clutch of firefighter 'schemes').

Silvertabby

Malchester wrote: »

Thanks again Silvertabby. No AVC's involved. I left local government in 1994 after about 11 1/2 years in the scheme.

I am in two minds whether to leave it and not contact them and just accept they are correct and decide what to do on that basis, or contact them risking the offer being reduced if they are wrong. The offer makes me more likely to take a higher lump sum as it would take me to the age of around 78 to break even.

This sounds like you've been quoted a commutation factor for the FPS (West Yorks administer a clutch of firefighter 'schemes'). Posted by hyubh

Is hyubh right - were you were in the Fire service pension scheme rather than the LGPS? If so, mystery solved - commutation is correct for age 60!

Malchester

No never been in fire service, never even been in a fire station!!! I worked for one of the West Yorks local authorities