Merseyside Pension Fund - Offer

antdon

Hi
Long question.. Sorry..

Any help would be very gratefully received...

I am 58. Male.
My current state retirement age is 66
I have a Merseyside Pension Fund (superann) pension that ran for 18 years, and had been deferred for the last 20ish years

For the last 17 years I have been paying into an Aviva pension scheme through my current job.

I have recently had a letter from Merseyside fund offering the 3 options below...
Standard
Pension £5605
Grant £17708
Maximum conversion
Pension £4552
Grant £30300
Preserved Benefit (payable from March 2020)
Pension £6200
Grant £18700

My questions are…

1. Preserved Benefit??? Payable from 2020 ( I am only 60 in 2020)

2. By my rough calculation, If I took the Standard Pension now, I would receive approx. £42k – 20% TAX (£33K) over the next 7.5 years before my state pension age.
Even if my final pension is, lets say, reduced by 30% because of taking it early I would lose out by approx. £2k each year from the age of 66. BUT I would have received £33k by then .. i.e. I would be 82 BEFORE I WOULD LOSE OUT. Am I right?

3. Am I missing something out?

4. Should I try to arrange a meeting with Merseyside Pension Fund to see if I can gain some clarity from them?

5. Is there any reason I should not consider this?

Silvertabby

This is the LGPS.

Because of your age/dates of service/amount of deferred membership your benefits are indeed due payable in full from age 60.

Ordinarily, you wouldn't have received this letter until shortly before your 60th birthday - but the rules have recently been changed to allow access from 55, hence your letter.

If you decide to leave your benefits until 60, then you will have the further option of maximum lump sum conversion of £4,987.50 annual pension and £33,250.00 tax free lump sum (plus cost of living increases). However, note that the public sector commutation rate of 1:12 is not particularly generous.

The decision to take permanently reduced benefits now or wait until 60 depends on your personal circumstances - but as it sounds like you weren't expecting this money until 65/State pension age, then leaving it until 60 shouldn't be a problem for you?

woolly_wombat

antdon wrote: »

1. Preserved Benefit??? Payable from 2020 ( I am only 60 in 2020)

You left the LGPS before 1 April 1998?

https://lgpsmember.org/arl/already-left-when.php

If you left the LGPS before 1 April 1998

Your deferred pension benefits are normally payable in full at your Normal Retirement Date (NRD). Your Normal Retirement Date is different to the Normal Pension Age for members who left on or after 1 April 1998. Your Normal Retirement Date is:

• age 60, if by that age you would have built up 25 years membership if you had remained in the scheme until then, or
• the date you would have achieved 25 years membership if you had remained in the scheme, if that date falls between your 60th and 65th birthday, or
• age 65 if, by that age, you would not have had built up 25 years membership if you had remained in the scheme until then.

antdon

Many many thanks for the replies....
I have been trying to work this out for ages...

I have just checked and I left the scheme on 30/06/2000

Is the pension still payable in 2020?

kidmugsy

antdon wrote: »

I am 58. Male. My current state retirement age is 66. I have a Merseyside Pension Fund (superann) pension that ... had been deferred for the last 20ish years ...

I have recently had a letter from Merseyside fund offering the 3 options below...
Standard
Pension £5605
Grant £17708
Maximum conversion
Pension £4552
Grant £30300
Preserved Benefit (payable from March 2020)
Pension £6200
Grant £18700

(a)What date of payment have they offered for option 1?

(b) Don't overlook inflation-protection. It's horribly expensive to buy inflation-protected income commercially so you are faced with a genuine choice between the first and third options. You might be wise to check whether those two options leave your widow's pension unchanged.

Based on what you've told us, and on silvertabby's expertise, and on ww's answer to your latest question, and on guessing the answer to my question (a), in your shoes I think I would plump for option 1 i.e. the standard package paid soon.

(c) Unless you have an utterly compelling need for more capital very soon, and hang the expense, I'd give option 2 a swerve. There must be umpteen cheaper ways to get a bit of capital than that. Unless you hold the council tax payers of Merseyside close to your heart.

Silvertabby

antdon wrote: »

Many many thanks for the replies....
I have been trying to work this out for ages...

I have just checked and I left the scheme on 30/06/2000

Is the pension still payable in 2020?

Yes, because you have reserved rights to the Rule of 85. ie, your actual service, plus your deferred membership, plus your age = 85 or more at age 60. (18 + 20 + 60 = 98).

Whichever option you go for, reductions for early payment and/or commutation don't affect your spouse's pension in the event of your death.

antdon

Thank you very much
Silvertabby, kidmugsy, & woolly_wombat

You have helped a lot.
I just need to do the maths now.....


One final question

How is the pension paid...?
Do you have to complete a tax self assessment for the pension amount, given that I am currently employed and that 20% tax would be due on the full amount of the pension

squirrelpie

Do you have to complete a tax self assessment for the pension amount, given that I am currently employed and that 20% tax would be due on the full amount of the pension

Are you currently paid under PAYE? If so, everything should be automatic. When Merseyside Pension Fund start to pay your pension, they will communicate with HMRC who will give them an appropriate tax code to use.

Malchester

I recently went through this decision. I turned 60 in June and had to take my deferred LGPS pension. I was given choices between max pension / min lump sum and min pension / max lump sum. The usual commutation factor for LGPS is 1:12 (for every extra £12 lump sum you lose £1 annual pension. To my surprise, because of the exact years I worked in local government my commutation figure was 1:19, much more generous. I reckoned that it would, all things being equal (interest, annual upgrading, lower tax etc) it would take 19 (I would be 79) years before I started losing out so took large lump sum. So make sure you know the commutation factor before making a decision. I think a previous thread I started on this should still be available

Silvertabby

Malchester wrote: »

I recently went through this decision. I turned 60 in June and had to take my deferred LGPS pension. I was given choices between max pension / min lump sum and min pension / max lump sum. The usual commutation factor for LGPS is 1:12 (for every extra £12 lump sum you lose £1 annual pension. To my surprise, because of the exact years I worked in local government my commutation figure was 1:19, much more generous. I reckoned that it would, all things being equal (interest, annual upgrading, lower tax etc) it would take 19 (I would be 79) years before I started losing out so took large lump sum. So make sure you know the commutation factor before making a decision. I think a previous thread I started on this should still be available

From the figures in Post 1, OP is looking at a factor of 1:12.

Silvertabby

antdon wrote: »

Thank you very much
Silvertabby, kidmugsy, & woolly_wombat

You have helped a lot.
I just need to do the maths now.....


One final question

How is the pension paid...?
Do you have to complete a tax self assessment for the pension amount, given that I am currently employed and that 20% tax would be due on the full amount of the pension

MPF will initally take a minimum of 20% tax. I would speak to your usual tax office to explain that you are about to take this pension, and that you want them to allocate MPF with tax code BR (basic rate) for you. Assuming, of course that your salary plus pension doesn't tip you into the 40% bracket....