LGPS help !!!!

woolly_wombat

Teaandscones wrote: »

Have you thought of retiring at say age 57 but leaving your LGPS pension untouched until your 60th birthday to get your rule of 85 protections.

To bridge the gap, you could save in a separate pension (HL SIPP for example) and pick very conservative investments. You would then be getting the benefit of tax relief and can then (using 25% tax free lump sum plus personal allowance) get £16,666 p.a. tax free from age 57 until age 60. You would then be deliberately running down the SIPP to preserve the LGPS pension.

That option may be better to get extra pension because the APC's would be subject to significant actuarial reductions.

A very sensible suggestion, but one that requires planning.

I quit at 55 and shall be drawing down my HL SIPP when my other half retires some time over the next year or two.

LGPS and state pension will follow.

Johnnyboy11

Silvertabby wrote: »

Scottish LGPS rules often differ from English / Welsh rules. This may be one of them - but I would still check !

When did you leave as, in view of your age, you will only have R85 protections in respect of your pre 2008 service. Worse possible case would be that you take a full 5 year hit from your pre 2008 benefits, and a 9 year hit on respect of your post 2008 service (I'm assuming that you don't have any post 2014 service?)

Thanks. I will check, and I do have other retirement funding options if I need to wait until age 60. The benefit of taking the LGPS early for me is that it reduces the back-end loading of my retirement income when the State Pension kicks in.
I left in April 2010 with near 17 years membership, so all bar 2 years is covered by R85, and I'd factored in a 4 year actuarial reduction from age 56 (When I meet R85) until age 60.

PoorPaul

Hi, can I jump in and ask to help me understand the LGPS system...

From what I understand, if I retired at 55 with 33 years membership, R85 would not kick in at Age 60 (unless employer agrees otherwise). Therefore my pre 2008 part of my pension would be subject to reduction by 40.6% - is that correct so far?
And finally, does that reduction stay at 40.6% for the next 5 years and does it then change when I reach 60 and R85 applies - or is that then 'null and void' as I'm already taking my pension?
Thanks in advance.

Silvertabby

PoorPaul wrote: »

Hi, can I jump in and ask to help me understand the LGPS system...

From what I understand, if I retired at 55 with 33 years membership, R85 would not kick in at Age 60 (unless employer agrees otherwise). Therefore my pre 2008 part of my pension would be subject to reduction by 40.6% - is that correct so far?
And finally, does that reduction stay at 40.6% for the next 5 years and does it then change when I reach 60 and R85 applies - or is that then 'null and void' as I'm already taking my pension?
Thanks in advance.

Based on your age, your R85 protections only apply to your pre 2008 benefits.

You would meet R85 at 60 - so, if you retired at 55, you would be taking your pre 2008 benefits 5 years early. That's roughly a 25% reduction from your pension and 14% from your automatic lump sum

You have no R85 protections in respect of your post 2008 service, so those reductions would be:

1 April 2008 to 31 March 2014 = 10 years reduction.

31 March to date of leaving = 11 years reduction (if SPA is 66 - 12 years reduction if SPA is 67 etc)

R85 protections don't change once the pension is in payment - you make your choice for life.

PoorPaul

Silvertabby wrote: »

You would meet R85 at 60 - so, if you retired at 55, you would be taking your pre 2008 benefits 5 years early. That's roughly a 25% reduction from your pension and 14% from your automatic lump sum

Thanks Silvertabby, now that is something I didn't know re the pre 2008 benefits... i.e. that as I meet R85 at 60 then by taking them at 55 its 'only' a 5 year/24% reduction rather than being calculated back from 65 so a 10 year/40.4% reduction.

But to clarify - am I right that to avoid any reduction on the pre 2008 benefits, I can still retire at 55, only start taking benefits at 60, and I still qualify for R85 even though I've not been working for my employer?

Silvertabby

Yes - age 60 is your CRA in respect of your pre 2008 benefits. Strictly speaking, 33 years service at age 55= 88, meaning that you reach R85 at 56.5, 3.5 years before CRA. However, whilst it is an employer's discretion to plug this gap, it would mean them throwing a wadge of money into the fund on your behalf - so it is normal practice for the member to take the full hit (5 years in your case - could be more for people with less service).

If it's of interest, if you were to take flexible retirement before 60, then your employer would have no choice but to pay to plug the gap in respect of R85 protected benefits before 60. This would mean that your pre 2008 benefits wouldn't be reduced at all, but your post 2008 benefits would still be subject to full reductions.

Yes, retiring at 55 but leaving your benefits deferred until 60 means that your pre 2008 benefits would be paid without any reduction, your 2008 to 2014 benefits would only be reduced by 5 years, and your post 2014 benefits by 6/7 years.

Crabby

The Logic tree for Teesside pensions suggests that pre 2008 pension is protected even if you take your pension before age of 60,



http://www.teespen.org.uk/pdf/85_year_rule.pdf


but if you read closely it is with your Employers consent.



I know one employer who won't consent, even for a 58 year old female part timer with nearly 35 years of loyal service.
So basically the 85 year rule will not be invoked for anyone who was under 60 on March 31st 2016, unless they want rid of you.

Silvertabby

Crabby wrote: »

The Logic tree for Teesside pensions suggests that pre 2008 pension is protected even if you take your pension before age of 60,

http://www.teespen.org.uk/pdf/85_year_rule.pdf

but if you read closely it is with your Employers consent.

I know one employer who won't consent, even for a 58 year old female part timer with nearly 35 years of loyal service.
So basically the 85 year rule will not be invoked for anyone who was under 60 on March 31st 2016, unless they want rid of you.

Employer's consent in these cases includes having to pay a chunk of money into the pension fund - so it rarely happens.

Silvertabby

Found a good example for you all:

Eric is 55 and retiring, only his Pre 2008 (80ths) have R85 protection and his R85 date is his 58th birthday as he joined on his 31st Birthday and will have been in the LGPS for 27 years on his 58th Birthday (58 PLUS 27 = 85).
Eric’s pre-2008 pension would normally be unreduced at 60. He is retiring at 55 which is 5 years early, so his pre-2008 pension would normally be reduced by (approx.) 22.2%


However, if his employer switches on the rule of 85 for him, his 80ths unreduced date changes to being his actual R85 date of 58 instead of 60, so his pre-2008 pension would only be 3 years early at 55, meaning it would be reduced by (approx.) 14.3% instead of (approx.) 22.2%, but this comes at a cost of £5000 to his employer.

Crabby

Employer's consent in these cases includes having to pay a chunk of money into the pension fund - so it rarely happens.

Was this the case pre 2008? If not the only thing that has changed is the arbitary raising of retirement age.