LGPS Lump Sum payment do I have to take it ?

Tiggy777

Hi all

I recently obtained a quote for the payment of my LGPS pension early at 57 which had 2 sets of figures : Standard Benefit pension £19,484pa with a lump sum of £44,185 or a pension of £18040 and a lump sum of £61,511.

I wonder prefer a higher annual pension and wondered do I have to take the £44,185 standard lump sum or can it be reduced and as a result I get a higher annual pension.

Reason being I have an AVC through prudential/employer which will give me an ok lump sum.

Appreciate any comments and thanks fort your time

Regards

Tiggy

geoffers4

I'm in an almost identical position - do you have a logon to your LGPS administrator's website (it varies around the UK)? Mine is https://www.yourpensionservice.org.uk/

and includes an online calculator where you can increase or decrease the lump sum, to see what effect that has on your annual pension.

hyubh

Tiggy777 wrote: »

I wonder prefer a higher annual pension and wondered do I have to take the £44,185 standard lump sum or can it be reduced and as a result I get a higher annual pension.

Unfortunately, the possibility of so-called 'reverse' or 'inverse' commutation ('election for pension in lieu of retirement grant' in the original jargon of the scheme) was removed in 2006.

actfast

The OP's post suggests there is an option of higher or lower lum sum. I think what you are saying is that "no lump sum" is no longer an option.

Tiggy777

actfast wrote: »

The OP's post suggests there is an option of higher or lower lum sum. I think what you are saying is that "no lump sum" is no longer an option.

Many thanks for the replies.

My question was about 'is' there an option to take a lower lump sum and increase the annual pension...I take it from hyubh that this option was removed so I will have to take the 44185 although I believe I need to use my AVC fund first to fund any lump sum. This will leave me a balance which I need to work out what to do with i.e. where to put it ? Think my choses are an annuity linked to LGPS or through a third party, not sure which will be best ?

hyubh

Tiggy777 wrote: »

My question was about 'is' there an option to take a lower lump sum and increase the annual pension...I take it from hyubh that this option was removed so I will have to take the 44185 although I believe I need to use my AVC fund first to fund any lump sum.

No, your pension benefits in relation to service (i.e. pensionable employment) before April 2008 come with a lump sum as standard (3/80 x reckonable years x final pensionable pay; the pension for that period is then 1/80 x reckonable years x final pensionable pay). You can't choose to take a lump sum from the AVC instead, it's only 'as well'.

This will leave me a balance which I need to work out what to do with i.e. where to put it ? Think my choses are an annuity linked to LGPS or through a third party, not sure which will be best ?

You can also transfer the AVC out to another pension provider to access it 'flexibly' completely apart from your LGPS pension:

https://www.lgpsmember.org/more/AVCoptions.php

While using an AVC to fund additional lump sum is perhaps the most popular option, the main reason for this is the commutation rate for exchanging scheme pension for lump sum being very poor. If you are not interested in extra lump sum (or at least, not yet), then (depending on needs) either purchasing additional LGPS pension or transferring out would probably be a better option.

Tiggy777

hyubh wrote: »

No, your pension benefits in relation to service (i.e. pensionable employment) before April 2008 come with a lump sum as standard (3/80 x reckonable years x final pensionable pay; the pension for that period is then 1/80 x reckonable years x final pensionable pay). You can't choose to take a lump sum from the AVC instead, it's only 'as well'.



You can also transfer the AVC out to another pension provider to access it 'flexibly' completely apart from your LGPS pension:

https://www.lgpsmember.org/more/AVCoptions.php

While using an AVC to fund additional lump sum is perhaps the most popular option, the main reason for this is the commutation rate for exchanging scheme pension for lump sum being very poor. If you are not interested in extra lump sum (or at least, not yet), then (depending on needs) either purchasing additional LGPS pension or transferring out would probably be a better option.

Many thanks for the replies.....

Is there a limit to purchasing additional pension as I have about a year to go (to retire at 57) and an AVC pot of about £100k...think I may have missed the boat ?

Thanks

Tiggy

Durban

Can any residual AVC be moved to a SIPP after taking maximum lump sum?

hyubh

Tiggy777 wrote: »

Is there a limit to purchasing additional pension as I have about a year to go (to retire at 57) and an AVC pot of about £100k...think I may have missed the boat ?

Purchasing additional pension directly from the proceeds of an AVC on retirement is a thing in itself separate from purchasing additional pension via an APC (be that via regular contributions or a lump sum). Unlike the latter, I don't think there's a limit, though best check with the scheme administrator.

That said, with a pot of £100k, it might be sensible to get some proper financial advice.

hyubh

Durban wrote: »

Can any residual AVC be moved to a SIPP after taking maximum lump sum?

I think to take the transfer out option, it's all or nothing, though I'll be honest and say I'm not 100% sure. A call to the AVC provider (whether that's Prudential or whoever) should be able to clarify whether part-transfers out of the AVC are possible.

Silvertabby

hyubh wrote: »

Unfortunately, the possibility of so-called 'reverse' or 'inverse' commutation ('election for pension in lieu of retirement grant' in the original jargon of the scheme) was removed in 2006.

Yes, but there are a tiny number of members (and I really do mean tiny) who have retained reserved rights to inverse commutation. The rules are really complex and may differ from LGPS (interpretation) to LGPS, so only Tiggy's LGPS provider will be able to say if they apply to her.

So are so few eligible members that when the software was updated the calculation for inverse commutation was removed, meaning that it now has to be done manually. The LGPS I worked for would just give the normal options of standard/maximum lump sum, but would say that inverse commutation was an option, and that details would be supplied on written request. Then we'd cross our fingers. During my time, only two members asked for further details - and only one of these actually went for the inverse commutation.