Deferring LGPS Pension

Moby

If I decide to retire early I can get a projection from my provider telling me what my pension will be and how it has been reduced due to taking it early. My problem is this projection can't take into account me retiring early but deferring taking the pension until a particular future date. In those circumstances it will clearly be reduced because I've stopped paying in. Is there any way of getting a formula for a rough estimate of a pension that you defer taking until a future date. I know cost of living revaluation complicates things but I'm just looking for a rough estimate?

Dorian1958

The scheme rules will state how pensions in deferral will be revalued, not all schemes will be the same. If it is based on cpi, why not calculate the cpi average over say the last 20 years, then apply this to the deferred (not reduced) figure, for each year you intend to defer. As good as anything as a guess I suppose, or in the current climate you could just stick your finger in the air.

xylophone

https://www.lgpsmember.org/

How are Pension Increases calculated?
Your pension is increased in line with the cost of living in order to maintain its spending power. The increase is measured by the September to September adjustment in the Consumer Price Index (CPI) and is applied to your pension from the following April. If the cost of living has gone down your pension will not be reduced - it will remain payable at the same rate.

For example, the CPI index for the year up to September 2017 was 3%, therefore, an increase of 3% was applied to pensions in payment from 9 April 2018.

If applicable, the first increase to your pension after retirement (from active membership) will normally only be a proportion of the full increase, depending on how many months your pension has been in payment during the year.

From your State Pension Age (SPA) payment of the increases to your pension may be shared between your pension fund and the Government. This is because the LGPS guarantees to pay you a pension that is at least as much as you would have earned had you not been contracted out of the State Earnings Related Pension Scheme (SERPS) at any time between 6 April 1978 and 5 April 1997. This is called the Guaranteed Minimum Pension (GMP).

This GMP forms part of your LGPS pension (it is not paid in addition to it) and the Government is responsible for paying part of the cost of living increases on it, as below:

Guaranteed Minimum Pension (GMP) earned between 6 April 1978 and 5 April 1988 Pension increases are paid by the State with your State Pension

Guaranteed Minimum Pension (GMP) earned between 6 April 1988 and 5 April 1997
The first 3% of the pension increase is paid by your LGPS pension fund. Any increase above 3% will be paid by the Government with your State Pension

Pension in excess of Guaranteed Minimum Pension Pension Increases will be paid in full by your LGPS pension fund.

However, the above does not apply if you reach State Pension Age between 6 April 2016 and 5 April 2021 as your LGPS pension fund will be responsible for payable the full increases to your pension including the GMP amount.

The GMP part of your pension will receive a full years increase even if the rest of your pension is receiving a proportion of the increase because you retired part way through the year.

Johnnyboy11

Moby wrote: »

If I decide to retire early I can get a projection from my provider telling me what my pension will be and how it has been reduced due to taking it early. My problem is this projection can't take into account me retiring early but deferring taking the pension until a particular future date. In those circumstances it will clearly be reduced because I've stopped paying in. Is there any way of getting a formula for a rough estimate of a pension that you defer taking until a future date. I know cost of living revaluation complicates things but I'm just looking for a rough estimate?

Worth checking if you have 'Rule of 85' protection for some or all of your LGPS pension. I think you had to be a member before November 2006, and protection ended in March 2008. Scheme membership continues even if your pension is deferred.