Lgps

Rob408

Can someone please clarify this query re LGPS.
I work for the LA and joined the scheme in May 2018. I pay a contribution of 6.5% a month and I believe my employer pays approx 19%. The scheme states my contribution is 1/49th of my pay, so 1/49th of £24,500 is £500 plus inflation is what I would accumulate in a year. However I am confused about this. I pay 6.5% a month which is more than £100 a month in contributions so why is only £500 going into my pension pot? where is the rest? Also where is my employers contribution in the calculations?

JoeCrystal

You need to read your scheme literature again. Basically, every year you worked for them, you will build up 1/49 of the salary in that year. Once you reach SPA, the combined amount will be paid out to you on an annual basis. It is extraordinary good deal.

Johnnyboy11

That £500 is every year from your retirement age, until the day you stop drawing breath. Considering that it's index linked and carries a 50% survivor pension, it would probably cost you about £17,000 to buy equivalent cover on the annuity market. As above, it is a very good deal.

Dazed_and_confused

So you pay £1,200, effectively a one off contribution, albeit spread across the course of year.

And receive £500 per year for an unlimited period of time. Live to 117 and you could get say £500 x 50 so £25,000. Before inflation related increases are even considered.

Amazing how often this is posted by people as a potentially bad deal. Bad for the local authority or the "taxpayer" maybe. But definitely not bad for you the employee.

GunJack

It's a Defined Benefit scheme, it promises to pay you 1/49th of your salary every year from retirement for each year worked, there is no "pot". You just pay your 6.5% to be a member of the scheme. You are confusing this with a Defined Contribution scheme, where there is a pot of money.

For example (and ignoring inflation or salary increases for ease, which actually make it even better), if you work for 35 years at a salary of £30kp.a. you get (£30k/49)*35 = £21428 PER ANNUM pension

What you have is far better than just a "pot"....

enthusiasticsaver

There is no pot for the LGPS. You will be paid a defined benefit at retirement age (or sooner with reductions) according to how long you have worked there and the percentage you put in (6.5% is the base) and your salary. Your employer (LA) does not actually pay in to the pension they just promise to pay you an amount which can be calculated using the 1/49. I have a LGPS and there are all sorts of online tools which can give you forecasts.

You only have a pot with a DC scheme.

Andy_L

enthusiasticsaver wrote: »

There is no pot for the LGPS. You will be paid a defined benefit at retirement age (or sooner with reductions) according to how long you have worked there and the percentage you put in (6.5% is the base) and your salary. Your employer (LA) does not actually pay in to the pension they just promise to pay you an amount which can be calculated using the 1/49. I have a LGPS and there are all sorts of online tools which can give you forecasts.

Yes they do, LGPS is one of the few public sector schemes where contributions are invested to pay future pensions.

GunJack

Andy_L wrote: »

Yes they do, LGPS is one of the few public sector schemes where contributions are invested to pay future pensions.

It may even be the last one to do so...

Andy_L

GunJack wrote: »

It may even be the last one to do so...

The MPs scheme is a funded one.

enthusiasticsaver

Andy_L wrote: »

Yes they do, LGPS is one of the few public sector schemes where contributions are invested to pay future pensions.

That is not shown on individual benefit statements though as a DC pot would be. The local government invests the contributions but not all in individual pots.

OldBeanz

What you should be doing is investigating your AVC scheme. At present you can contribute to that and take all the money tax free (there are limits but none to worry about for a long time). It is the cherry on the golden egg for LGPS pensioners.