Transfer £58K SIPP to LGPS?

AnotherJoe

I would keep it separate for flexibility. For example it might let you retire a few years earlier than otherwise and/or avoid having to take a hit on an earlier payout from the LGPS.

Apodemus

Make sure you read the small print of what your LGPS scheme is quoting, as the benefits on the sum transferred in may be different to your payments into the normal scheme (at least that is the case with APC payments).

Another option might be to see if you can transfer the sum into the AVC scheme, as this way you might be able to get it all back out tax-free when you access the LGPS pension.

However, do bear in mind the loss of flexibility the you would have if it is all tied up in LGPS. If you decide to retire early, having a SIPP to draw down first might be a better option than accepting the actuarial reduction.

jdw2000

So, I am wondering whether it's worth transferring my £60k SIPP to my LGPS.

Today I received my quite from the council I work for. It's says:

 "£60,273.64 would entitle you to an additional pension credit of £5524.62 per annum in the Local Government Scheme"

I am 43 years old. So the £60k in my SIPP has more than 20 years to grow. 

Am I best off leaving it in my SIPP (it's invested in Vanguard Life Strategy), or am I best off transferring it to my LGPS?

I started my LGPS 2 years ago, so it's not worth much at the moment.

xylophone

 My previous comments (first page) apply here as well.
https://www.lgpsmember.org/more/tvin-nonLGPS.php
You will need to carefully consider whether to transfer or not, as a transfer may not always be advantageous. For example, you should compare the amount of extra pension the transfer payment will buy in the LGPS, when that pension is normally payable from (i.e. your Normal Pension Age) and the other LGPS benefits (e.g. the ability to retire and draw benefits earlier than Normal Pension Age, death and survivor benefits, etc.) against the value of the package of benefits if left with your previous pension scheme provider.

Gary1984

It's obviously a personal choice based on your own circumstances where you have to weigh up the security and predictability of the LGPS scheme vs flexibility and potential growth in the SIPP.  However, if you kept it in the SIPP which then increased at 4% above inflation for 20 years  then it would be worth £132k in today's money at SPA.  Then a 4% drawdown would then give you £5280 p.a. so slightly less then you're being offered guaranteed now.  Both assumptions here (4% above inflation growth and a 'safe' withdrawal rate of 4%) are probably on the slightly optimistic side. 

By transferring you're locking in this guaranteed index-linked income and transferring the risk away from yourself onto the LGPS.  I'd say do it unless you have underlying health issues that you know of which may reduce life expectancy.

jdw2000

Gary1984 said:

It's obviously a personal choice based on your own circumstances where you have to weigh up the security and predictability of the LGPS scheme vs flexibility and potential growth in the SIPP.  However, if you kept it in the SIPP which then increased at 4% above inflation for 20 years  then it would be worth £132k in today's money at SPA.  Then a 4% drawdown would then give you £5280 p.a. so slightly less then you're being offered guaranteed now.  Both assumptions here (4% above inflation growth and a 'safe' withdrawal rate of 4%) are probably on the slightly optimistic side. 

By transferring you're locking in this guaranteed index-linked income and transferring the risk away from yourself onto the LGPS.  I'd say do it unless you have underlying health issues that you know of which may reduce life expectancy.

Thank you very much for that. Those were the numbers I was looking for. That's very helpful 🙂

OldBeanz

You state that you are low paid but if that takes you into paying tax then opening an AVC can give you a tax free lump sum on retirement. Tax relief on the way in and no tax on the way out.

Gary1984

That's true. The tax free lump sum saves you £5280 * 0.25 * 0.2 = £264 p.a. in tax so would bring the value of the SIPP with the 4% assumptions calculated in my earlier post almost exactly in line with the guaranteed LGPS values. A couple of other points I also forgot to mention:

- It's not just 4% after inflation that you need the SIPP to grow by but also after charges. Although VLS80 is relatively cheap, it's still another 0.22% drag on your returns combined with whatever your SIPP provider is charging that needs to be earned in addition to inflation + 4%.  
- As well as transferring the risk of your fund running out due to lacklustre investment performance or living too long to the LGPS you're also transferring the hassle.  Do you want to be managing the SIPP investments and drawdown when you're in your 80s? With the LGPS you'll just get your money transferred into your bank account automatically along with the rest of your LGPS pension.