Should I combine Local Government Pension Scheme pots?

piccalilli82

Hi, hoping someone here is able to help me decide what to do with my pension – I’ve read everything I can and am still baffled!

I was in my previous local gov job for 12 years and have 3 ½ years service at 1/80th, 6 years at 1/60th and 3 years CARE. My final pay was £40,000

I have been in my new job (which is also LGPS) just over a year and need to decide if I want to transfer my previous pension and combine with my current. My pay is now £42,000 I don’t have any plans to leave local government in the near future, I am expecting that my salary will rise over coming years but not astronomically.

What are the potential benefits and drawbacks with combining or leaving funds separate? Does it make any difference to what age I might be able to retire at? (I’m mid 30’s so I know it’s a long way off!) is there any benefit to still having a sliver of final salary membership?!

Silvertabby

Is there a gap between leaving your first LGPS post and starting your second - if so, what are the dates?

piccalilli82

Thanks for responding - I don't have any gaps in service (have just been slow in figuring out what to do!)

Silvertabby

No gaps makes things easier - but it's still crystal ball time, I'm afraid.

Combine

All pre 2014 service maintains its final salary link - so your 9.5 years of FS service will be calculated on your new job salary as at your eventual date of leaving. This may or may not be higher than your old salary of £40K plus deferred benefit cost of living increases.

If you were to be made redundant (currently 55+) then ALL of your combined benefits could be payable on redundancy terms (ie, not reduced for early payment).

Don't Combine

Deferred benefits increase in line with CPI inflation. This has historically been higher than the annual pay rises applied to 'live' benefits.

If you were to be made redundant from your current post then you would still be able to access your old, deferred, benefits - but they would be actuarily reduced for early payment.



Your retirement age - combined or not combined - is still the same as your State pension age. Did you join before or after October 2006? If before, then you will have a little bit of Rule of 85 protections in respect of your pre 2008 service only (so not anywhere near enough to make a drama about) but if you joined after October 2006 then you have no R85 protections.

Have you already started the transfer ball rolling? It's just that many employers apply a 12 month cut off for transfers in.

piccalilli82

Thanks for this! I do have about a year or so of pre 2006 membership if that makes any difference.

I applied for the transfer in just after the 12 months had elapsed and it took a while to receive any information. I have since spent a bit of time trying to figure out the right thing to do but did get a letter asking me to confirm the decision a few weeks ago so I think the option is still open thankfully.

Sounds like there is unlikely to be a drastic diffenrence either way (unless the R85 membership changes anything?) I'm inclined to combine if just to keep things in one place and more manageable but it's not clear!

Silvertabby

piccalilli82 wrote: »

Thanks for this! I do have about a year or so of pre 2006 membership if that makes any difference.

I applied for the transfer in just after the 12 months had elapsed and it took a while to receive any information. I have since spent a bit of time trying to figure out the right thing to do but did get a letter asking me to confirm the decision a few weeks ago so I think the option is still open thankfully.

Sounds like there is unlikely to be a drastic diffenrence either way (unless the R85 membership changes anything?) I'm inclined to combine if just to keep things in one place and more manageable but it's not clear!

Your bit of R85 protection would transfer with you, so that's not an issue. I've been asked this question many times 'Would I be better off combining or not?' and the answer is 'I don't know - it depends on what happens in the future'.

Your case is fairly straightforward - no gap, and new job on a higher salary than the old - so the only real question mark would be if your new salary only increases by, say, 1% per year whilst your deferred benefits increase by 3% CPI a year. By the time you reach retirement age, your deferred benefits could have overtaken your current job salary. Then again, if you were to be promoted a couple of times then your current salary could leave your old one behind.

As I said, it's crystal ball time I'm afraid.

DominicMc

Silvertabby , just posting for the first time here as I’ve just read your response and its great. Clear concise and just really well put. Bravo!

Silvertabby

Thank you !

kidmugsy

DominicMc wrote: »

Silvertabby , just posting for the first time here as I’ve just read your response and its great. Clear concise and just really well put. Bravo!

My dear sir, Silvertabby is a gem. Well known fact.

barnstar2077

I would take the CPI linked over the possibility of a slightly higher paid job later on every time myself.

Johnnyboy11

barnstar2077 wrote: »

I would take the CPI linked over the possibility of a slightly higher paid job later on every time myself.

Me too.


Since April 2009 a deferred LGPS pension has increased by 26% whilst public sector pay has increased by only 10%. That's a massive delta, affecting the retirement plans of everyone in the public sector, ouch!