LGPS Death Grant for Deferred members

snowqueen555

This section looks at the benefits that would be payable if you were to die after leaving LGPS but before you draw your pension benefits i.e. you hold a deferred benefit in the LGPS.

The benefits that may be payable depend on when you left the LGPS and are set out below:

Lump sum death grant
If you left the LGPS on or after 1 April 2008

A lump sum of 5 times your deferred annual pension will be payable.

Hi all

Am I seeing something wrong, but it seems to me that it is possible to lose more than you put in, if you happen to die early and no longer being a current LGPS member.

I have transferred in £25k which buys me around £3.5k. If I were to leave the LGPS and pass away, my beneficiary would only be entitled to 5 x £3.5k which is less than the £25k I put in.

I have no children or partner, so no survivors pension.

Am I missing something here?

It seems once you are a deferred member and are single with no dependants, the benefits of LGPS are not is great.

The best result I can have when dying early and being single, is to be a current member, where my beneficiary receives 3 x my basic salary.

Shimrod

snowqueen555 wrote: »

I have transferred in £25k which buys me around £3.5k. If I were to leave the LGPS and pass away, my beneficiary would only be entitled to 5 x £3.5k which is less than the £25k I put in.

I have no children or partner, so no survivors pension.

Am I missing something here?

It seems once you are a deferred member and are single with no dependants, the benefits of LGPS are not is great..

The benefit of the LGPS is the guaranteed, index linked income which at £25K for £3.5Kpa income is quite a big deal when compared to what £25K will buy as an annuity.


If you are concerned about leaving an inheritance, you should be looking at other vehicles such as life assurance.

Flugelhorn

DB pensions and death benefits etc are not related to actual amount of money that is put into the pot.
You could get very much more out of it than you have transferred over, the situation you refer to is the instance where you (or your beneficiary) get rather less out of it.

AlanP_2

What are the rules on LGPS beneficiaries? Typically it is partner / dependants for DB schemes.

In your scenario would anybody get the grant?

xylophone

What are the rules on LGPS beneficiaries? Typically it is partner / dependants for DB schemes.

Below from Dorset LGPS.

The Local Government Pension Scheme Lump sum death grant - Expression of wish


What is the death grant?

A lump sum death grant will be payable should you die whilst contributing to the LGPS or if you die and have deferred benefits in the scheme. If you were to die within 10 years of receiving your pension, a death grant may still be payable, however the benefits would be reduced accordingly.

You can express for the benefits to be paid to one or more individuals or organisations, however if you do not name any beneficiaries the death grant may be paid to your estate.

Under the LGPS Regulations the administering authority (Dorset County Pension Fund) retains absolute discretion with regards to the distribution of the benefits. For this reason, although Dorset County Pension Fund will have the greatest regards to your wishes, it is not legally bound by them.


Who can receive the death grant?

Any person(s) or organisation(s) may receive the death grant.

snowqueen555

Thanks for the replies.

It is a shame the possible drawbacks were not evident to me, and not very much talked about either.

It just struck me as odd that most pensions schemes offer life assurance as standard, typically 5-10 times salary as well as returning the pot of cash you have amassed. I am wondering how the life assurance companies make money from this, as it is more generous than LGPS in this instance.

Shimrod

snowqueen555 wrote: »

It just struck me as odd that most pensions schemes offer life assurance as standard, typically 5-10 times salary as well as returning the pot of cash you have amassed. I am wondering how the life assurance companies make money from this, as it is more generous than LGPS in this instance.

Can you provide some examples of this? Typically life assurance is provided by a company while you are an active member of the pension scheme (i.e. working at the company and contributing to the pension scheme). If you work at a company and are not a member of the pension scheme, you often get life assurance but at a lower level of cover (typically 2x vs 3x cover).


For a defined contribution pension scheme, the funds pay in would be available on death of a deferred member, but the benefits for making it to retirement would be considerably less than that of the LGPS scheme for the individual contributions paid in.

snowqueen555

Shimrod wrote: »

Can you provide some examples of this? Typically life assurance is provided by a company while you are an active member of the pension scheme (i.e. working at the company and contributing to the pension scheme). If you work at a company and are not a member of the pension scheme, you often get life assurance but at a lower level of cover (typically 2x vs 3x cover).


For a defined contribution pension scheme, the funds pay in would be available on death of a deferred member, but the benefits for making it to retirement would be considerably less than that of the LGPS scheme for the individual contributions paid in.

This is while I am employed. My last job in financial services offered 5x salary no dependants, and 8x if you had dependants. The LGPS offers 3x

In hindsight (using the example i would be in the LGPS for my working life, it may've been possible to grow/invest the funds for 20 years, and then transfer in. There seems to be no benefit to transferring in early than later on.

xylophone

it may've been possible to grow/invest the funds for 20 years, and then transfer in.

Doesn't any transfer in have to take place within a certain time of becoming a member of LGPS?

snowqueen555

Yes you are right, my bad

hyubh

snowqueen555 wrote: »

My last job in financial services offered 5x salary no dependants, and 8x if you had dependants. The LGPS offers 3x

Maybe it's just me, but I find it odd you are concentrating on an unusual scenario (namely, dying deferred, without a partner or dependant children, yet with a desired beneficiary). The primary reason to transfer a DC pension into the LGPS is surely to acquire more index-linked income on retirement, and on pretty preferential terms, not life assurance.

In hindsight (using the example i would be in the LGPS for my working life, it may've been possible to grow/invest the funds for 20 years, and then transfer in.

Of course, and the service or additional pension bought will reflect this somewhat.

PS - what's with this 'working life' thing though, thought you were looking to die deferred...?

There seems to be no benefit to transferring in early than later on.

This is academic, given the window for transferring in is not open-ended. That said, under the old final salary scheme, transferring in earlier rather than later would be preferable if you came to outpace the scheme's assumptions on salary growth, and vice versa if you didn't. It's only with the CARE scheme that you know in real terms what pension at NRA a transfer in buys you.