Transfer from LGPS to NHS, the figures?

swindiff

My wife was in an LGPS pension scheme for around 1 year and 8 months and then left her employment to return to the NHS. As she had less than 2 years service the funds in the LGPS have to either be refunded of transferred to a new pension scheme.

She already had a pension with the NHS from previous service and obviously enrolled again when she returned to work for them in September. She has also just started paying £200/month into a SIPP. She would like to retire at 60 so the SIPP is there to try and use up some of her tax free allowance between 60 and 67 as her NHS pension is only likely to be around £5k per year. She will be entitled to full state pension of £164 per week.

She was earning £20k per year in her LGPS employment and has started on £18.6k per year with NHS.

The document she has received states that the transfer will be into the 2015 NHS pension scheme on club terms.

The transfer value from LGPS is £7422.22

Pensionable earnings credit £0.00 (what is this?)
Club earned pension credit £688.39 (is this how much the transfer will add to her annual pension?)
Scheme year ending (this is left blank?)
Pensionable membership 1 year 249 days (this equates pretty much to her previous employment)

The £688 does not seem to tally up with the 1/54th accrual rate for the NHS scheme, it seems to be more in line with the 1/49th accrual rate on her higher salary of £20k, is this the benefit of club transfer?

So bit of a sanity check really is it best to go ahead with the transfer bearing in mind that if she retires at 60 there will be an actuarial reduction of 31% for taking the pension 7 years early.
Assuming that £688.39 is an annual pension figure at retirement age of 67 reduced that would be around £475 per year from age 60. She is 49 in June, so just over 11 years to planned retirement date.

The other option I guess is to transfer into her SIPP and use that to boost her income from 60-67, but I have pretty good provision in my pension to do that and we are the same age.

Thoughts, are my assumptions correct, anything I have missed?

Many thanks

Silvertabby

In a case like this, when the only options are a refund or a transfer, I really wouldn't get in a chew over the finer details.

Option 1 = Refund of your wife's contributions only (employer's contributions are forfeit). Approx £2K minus 20% tax = £1,600

Option 2 = Transfer to NHS, giving her a (index linked) pension of £475 per year from age 60. If she lives to, say, 85 then that would be £11,875 (plus cost of living increases).

It really would be a no-brainer to transfer.

swindiff

Is club earned pension credit the actual annual pension she would receive though. I tried to Google the terminology and came up blank.

Option 1 was never a consideration.

Option 3 is to put the £7.5k in her SIPP.

Before posting I was 90% sure that transferring to the NHS would be the best option but thought it wise to council advise from those more knowledgeable in pensions than I am on this forum.

Thanks ST

Silvertabby

swindiff wrote: »

Is club earned pension credit the actual annual pension she would receive though. I tried to Google the terminology and came up blank.

Option 1 was never a consideration.

Option 3 is to put the £7.5k in her SIPP.

Before posting I was 90% sure that transferring to the NHS would be the best option but thought it wise to council advise from those more knowledgeable in pensions than I am on this forum.

Thanks ST

Yes, and this will increase each year in line with inflation (CPI). This is guaranteed.

Transferring to a SIPP is indeed an option, especially as this can then be taken from age 55 onwards even if your wife is still working/contributing to the NHS pension scheme.

From experience, over 90% of LGPS members offered the choice of a refund or a transfer go for the refund - so it's nice to come across someone who is a bit more pensions savvy!

swindiff

Silvertabby wrote: »

Yes, and this will increase each year in line with inflation (CPI). This is guaranteed.

Thanks for that

Silvertabby wrote: »

Transferring to a SIPP is indeed an option, especially as this can then be taken from age 55 onwards even if your wife is still working/contributing to the NHS pension scheme.

Assuming it was invested in a SIPP until she was 60 and grew at a steady 5% it could be worth £13k, Clearly not guaranteed though and none of the other benefits such as Death in Service or surviving spouses pension. I assume these are included whhen transferring in?

Silvertabby wrote: »

From experience, over 90% of LGPS members offered the choice of a refund or a transfer go for the refund - so it's nice to come across someone who is a bit more pensions savvy!

I think part of the problem there is they only tell you what the refund value is, they don't tell you what it is worth when transferring. You don't get that information until you specifically ask for it. I think if both values were given up front then you would likely get more people transferring.

Silvertabby

Assuming it was invested in a SIPP until she was 60 and grew at a steady 5% it could be worth £13k, Clearly not guaranteed though and none of the other benefits such as Death in Service or surviving spouses pension. I assume these are included whhen transferring in? Posted by swindiff

Death in service benefits are determined by salary rather than pension. As for spouses pension, the NHS may be different from the LGPS so I would ask NHS pensions for the answer to that before reaching a final decision.