Taking my old LGPS pension at 55

partridge_pie

Hi All

Some thoughts please.

I left my previous Public Sector employer back in January 2009.

Due to relocation I did not become employed again until May 2009. I am still with that my current employer.

As service was not continuous I could not transfer my previous pension which has been frozen ever since.

My last statement from April 2018 stated as follows based on a retirement in 2029:

Annual Pension £6709
Lump sum £19372
Survivor pension £3323

I asked for a quote if I took my deferred benefits at 55 which will be in June this year.

They have quoted two options:

Annual Pension £5751
Tax free lump sum £17070
Survivors pension £3689

If I exchange £1 per year pension for an extra £12 in the lump sum up to the maximum the figures are

Annual pension £4611
Tax free lump sum £30746
Surviviors pension £3689

I realise the best thing to do is just to let the pension run its' course to 2029.

But I have £8500 in debt which could be wiped out in one go.

I have another public sector pension too which I am still paying in to.

My intention would be to invest some or most of any lump sum for my retirement.

The second option is very tempting but I do not want to make an horrendous financial mistake. I would also take out life insurance as I would lose the death in service benefits for my son if I cashed in.

In fact the second option seems to good to be true and I am not sure if there are any penalties to pay. I am waiting a reply from my old employer on that one although they take a lifetime to reply.

Thanks

ProDave

"If I exchange £1 per year pension for an extra £12 in the lump sum up to the maximum the figures are"

So they base the pension on expecting to pay it for 12 years. If drawing it at age 55 one would hope you will live a good deal longer than 67?

So I would ask the question the other way around. Can you REDUCE the lump sum in order to INCREASE the annual pension. If the same £1 / £12 rule apples that will be a better deal.

So reduce the lump sum to JUST enough to pay off your debt and take a higher pension?

BUT and this is where you need proper advice, when you start drawing one pension, it imposes a limit on how much you can pay into other pensions. Will that reduced limit be too low for your other pension to accumulate enough for your retirement plans.?

partridge_pie

Thanks Pro Dave for replying.
.
Never thought of the £1-£12 scenario the other way round. That has not been mentioned in their statement to be honest so will have to look into it.

Also had no idea how taking it would affect my current pension so food for thought.

I will see what they come back to me with but I doubt I will be taking either option although I have not ruled it out completely.

The pension was originally started in 1986 in my first full time job then transferred to two subsequent employers so there are a few years contributions in there.

Think I will speak to an Independent Financial Adviser before pursuing this.

Thanks once again.

Silvertabby

DOB = 1964.

In round years:

Actual service = 1986 to 2009 = 23 years

Deferred service to age 60 = 2010 to 2019 = 9 years

60+ 23 + 9 = 92

So, you meet the Rule of 85 in respect of your pre 2008 service (being almost all of your service) at age 60.

Another option would be to leave your benefits preserved in the scheme until age 60, when the early retirement reductions will be minimal. You will still have the option of commutation (ie, giving up some of your pension in return for a larger tax free lump sum) but the LGPS/public sector rate of 1:12 is not particularly attractive, unless you have a desperate need for this money.

Inverse commutation (giving up some of the lump sum for a bigger pension) is not possible.

xylophone

Also had no idea how taking it would affect my current pension so food for thought.

Taking a DB scheme pension (like LGPS) will not trigger the MPAA.

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/money-purchase-annual-allowance-mpaa/

Defined Benefit arrangements
If you receive a scheme pension from any defined benefit arrangement this will not trigger the MPAA.


Have you obtained a new state pension statement?
https://www.gov.uk/check-state-pension