redundancy and pension at 55

Rouge_One

I have been employed in Local Government for 15 years, paying into the Local Government Pension Scheme for the whole of that time.

I am aged 55 and have just been given 90 days’ notice informing that I will be made redundant in mid August.

I am informed that as well as redundancy, I will be able to access my pension, due to me being 55 years of age. Although the pension calculator states I will only receive £80 per week, would I be better taking this as opposed to taking the whole pot as cash to re-invest ? I understand that if I took this option, the first 25% would be tax-free and the remaining 75% will be added to the rest of my income and taxed in the normal way.

I also have two previous pensions which cover my whole working life. Would I be able to draw these tow and have the same option to take the whole pots as cash ?
I opted out of SERPS for eight when with a previous employer. Would this still be classed as "Government pension" or would this portion be identified as a private pension ?

I have a hobby, which has been generating around £100 per week and will be considering becoming self-employed to see if this will work as a way to supplement the pension (or the other way around) and if need be, I will look at part time employment or even another full time job.

I am a home owner, with no mortgage and my wife (aged 50) works full time. Downsizing is an option in the coming years which should free up around £150,000 once we have made the move. I also have share accounts currently valued at £20,000.

My head is a bit mashed at the moment with all the information being fed to me, so any advice or help would be very much welcome.

cfw1994

Is it a DB or DC scheme? I know many government ones were (are?) DB, & if so, it rarely makes sense to convert those....

£80 pw for perhaps 30-40 years sounds not bad....& if it is DB, then you would be required to pay for advice to get the option to move it ;-)

Marcon

I am informed that as well as redundancy, I will be able to access my pension, due to me being 55 years of age. Although the pension calculator states I will only receive £80 per week, would I be better taking this as opposed to taking the whole pot as cash to re-invest ?

Who knows? That's the whole problem with transferring from a scheme with guaranteed benefits to one without. If you do that and then take the whole lot as cash (you can't take the cash direct from the LGPS. You are required to receive financial advice before doing so, and that advice is a very high risk area for advisers, so costs are high - £5,000 or more is not uncommon), what will you do with the cash?

Probably worth seeing an IFA for a general discussion (which won't cost you anything like £5K) instead of thinking that free advice from total strangers, with no real knowledge of you and your wife (health, attitude to risk, ambitions for the future etc etc), is going to be all you need. Comments here are well meaning and often useless, but they are never based on adequate information.

Marcon

cfw1994 wrote: »

Is it a DB or DC scheme? I know many government ones were (are?) DB, & if so, it rarely makes sense to convert those....

£80 pw for perhaps 30-40 years sounds not bad....& if it is DB, then you would be required to pay for advice to get the option to move it ;-)

The LGPS is DB.

Spreadsheetman

What about the other two pensions - when can they be drawn and what are they worth?

Do you get more from the LGPS scheme if you delay taking it? i.e. is there an actuarial reduction taking it at 55?

First step is to get ALL the information about all pensions and savings you have.

Silvertabby

Did you obtain that £80 per week quote from the on-line calculator, based on normal retirement from age 55? If so, you may find that you will get more than that as redundancy pensions are normally paid without any actuarial reduction for early payment.

I say normally, because it depends on the actual terms of your redundancy.

If you are being given your benefits unreduced, then a transfer out isn't an option. At all.

Rouge_One

Silvertabby wrote: »

Did you obtain that £80 per week quote from the on-line calculator, based on normal retirement from age 55? If so, you may find that you will get more than that as redundancy pensions are normally paid without any actuarial reduction for early payment.

I say normally, because it depends on the actual terms of your redundancy.

If you are being given your benefits unreduced, then a transfer out isn't an option. At all.

Yeah I have just used the pension calculator, so have an idea that the actual amount will be higher as the penalties will not be incurred. No idea how much yet ...... Have asked LPGS for more information and a forecast this morning

Rouge_One

Spreadsheetman wrote: »

What about the other two pensions - when can they be drawn and what are they worth?

Do you get more from the LGPS scheme if you delay taking it? i.e. is there an actuarial reduction taking it at 55?

First step is to get ALL the information about all pensions and savings you have.

I have written to the other two pension providers to ask if I can draw them at 55 without penalty, due to redundancy with my current employer. I have 12 years (Northern Foods) pension with one and 8 years (railway pension) with the other.
There should be no reduction/penalty for taking the pension at 55 due to the organization making me redundant.

Silvertabby

Rouge_One wrote: »

I have written to the other two pension providers to ask if I can draw them at 55 without penalty, due to redundancy with my current employer. I have 12 years (Northern Foods) pension with one and 8 years (railway pension) with the other.
There should be no reduction/penalty for taking the pension at 55 due to the organization making me redundant.

The answer from Northern Foods and Railways will be no. The fact that you are being made redundant in your current post is irrelevent.

If you are sure that your LGPS pension will be paid without any actuarial reduction, then at least you can cross off the 'should I transfer out' question from your list. The only way you could transfer out would be to opt out from the LGPS in advance of your redundancy date, thus giving up the enormous benefit of having your pension paid unreduced.

Silvertabby

Rouge_One wrote: »

Yeah I have just used the pension calculator, so have an idea that the actual amount will be higher as the penalties will not be incurred. No idea how much yet ...... Have asked LPGS for more information and a forecast this morning

You will be amazed just how much higher your redundancy quote will be!

Your LGPS may not be willing/able to give you a quote without confirmation of your redundancy - but your employer should have already asked for a quote on your behalf (including the amount of employer costs that they would have to pay).

LHW99

Pensionwise may also be helpful, they can't give advice but can talk through your options and are free
https://www.pensionwise.gov.uk/en/appointments