Transfer LGPS into NHS or SIPP

swindiff

My wife has paid into and LGPS pension scheme for less than 2 years and has now changed her employment, returning to the NHS after a break of just over 2 years. She therefore needs to transfer her LGPS pension as it is less than 2 years it cannot be deferred.

We initially thought she should just simply transfer it into her NHS pension scheme, assuming that it would "buy" her the same amount of service (around 21 months). We are waiting to get the information from the NHS as to what the transfer would actually get her.

Assuming an accrual rate of 1/54th for each years service and a salary of £20k her 21 months service would be worth around £650/year pension. Would this be correct given the circumstances?

The other option is to take the CETV from LGPS which is £7500 and put it in a SIPP. She was planning on starting a SIPP at the end of the year (waiting to see what the Vanguard SIPP charges are) as we want to retire at 60 and would like some income to bridge the gap from 60-67.

We estimate at 60 her pension will be worth around £5k/year, so would like to be able to draw enough each year to use as much of her personal allowance as possible. She was going to put £200/month into a SIPP from the end of this year until we retire at 60, so 12 years

Assuming 4% growth and 20% tax relief those contributions could be worth £46k without the initial £7.5k going into the SIPP or £58k with the £7.5k transferred into the SIPP after 12 years.

So the options are a guaranteed £650/year for life with £11.5k tax free and £5k per year at 60 for 7 years

Or no additional guaranteed income added to her NHS pension with £14.5k tax free and just over £6k per year income at 60 for 7 years.

Are my calculations correct, am I missing anything. Any opinions or suggestions as to the best strategy?

Thanks

swindiff

Any insights or suggestions. Or anything I may have not thought about or missed?

AlanP_2

I would wait until you get the quote for what the transfer will "buy" in the NHS scheme and then consider the alternatives on offer.

Your calculations may be correct, but you don't need to decide until you get the official quote from the NHS.

Apodemus

I’m no expert on this, but I wonder if your calculation is based on what her service would have bought if it had been in the NHS pension scheme, rather than what it did buy in the LGPS scheme? Surely the transfer is based only on what the value in the LGPS was, which I believe is less than the equivalent would have been in the NHS? My understanding is that the NHS scheme offers considerably better terms, for lower employee contributions, so I don’t think you can expect the LGPS sum to buy the equivalent of 21 months NHS employment. It’s still likely to be better than you can get from a transfer to SIPP, though!

hyubh

swindiff wrote: »

Assuming an accrual rate of 1/54th for each years service and a salary of £20k her 21 months service would be worth around £650/year pension. Would this be correct given the circumstances?

The quote from the NHS scheme will confirm, but I think even as an 'under two year' transfer, it will be under usual Club terms (i.e. as if it was an ordinary CARE-only transfer). If so, this would entail the old scheme's revaluation rate being maintained for the transferred-in CARE credit. It would only get the NHS scheme's (higher) revaluation rate as a non-Club transfer, though presumably that would involve a lower base pension to reflect the fact.

Also, forget about the accrual rate - public sector CARE scheme transfers in don't buy added years, they buy a fixed amount of revaluing pension, so similar to an APC (or ARC) in LGPS terms.

hyubh

Apodemus wrote: »

My understanding is that the NHS scheme offers considerably better terms, for lower employee contributions

No, they are much of a muchness - the LGPS has a higher accrual rate, the NHS scheme a higher revaluation rate. The contribution bandings are different, but of a similar nature.