LGPS query

bjorn_toby_wilde

Hi folks,

I hope you can help with this one.

My wife has deferred benefits in the Local Government Pension Scheme.

Her last statement said she should receive an annual pension of £17,700 and a lump sum of £37k at her normal retirement date in 2024.

Just before her 60th birthday however she received a letter detailing her benefits if she retired early at 60. We were a bit surprised to see that there wasn't much reduction - an annual pension of £16,700 and a slightly higher lump sum of £38.5k. I'd always thought that there would be a more substantial reduction for early retirement.

Looking at these figures (and I hope I'm not missing something obvious!) it would seem she's better off taking the pension early even though she'll continue working in her current job with reduced hours.

Are there any downsides to this? It won't push her into a higher tax bracket although I'm guessing it will limit the amount of money she can invest into her other pension pot once she starts to take this pension.

daveyjp

Most of her pension probably falls under the earlier schemes and 85 rule where retirement at 60 (or younger ) was not unusual.

Flexi retirement is probably an option. She retires, takes her pension and is then re employed on a new contract earning a new pension under the current scheme rules.

bjorn_toby_wilde

Thanks. That may well explain it.

She left the LGPS in 2015 when she moved to work in the NHS. She also transferred the pension from her previous employment into the LGPS when she first joined in '99. A large proportion of it may well be under the old rules.

bjorn_toby_wilde

I don't think she'd meet the 85 rule from her membership of the scheme alone but the transfer in might have bought her enough extra years.

hyubh

daveyjp wrote: »

Most of her pension probably falls under the earlier schemes and 85 rule where retirement at 60 (or younger ) was not unusual.

Indeed regarding the first part, but not 'or younger' - the 85 year rule only applied from 60. In fact, it's taken recent retrospective amendments for pre-14 leavers to be able to choose to go before 60 (with an employer discretion to 'turn on' the 85 year rule prior to 60 - very unlikely if it will cost them)

hyubh

bjorn_toby_wilde wrote: »

She left the LGPS in 2015 when she moved to work in the NHS. She also transferred the pension from her previous employment into the LGPS when she first joined in '99. A large proportion of it may well be under the old rules.

Assuming she transferred in before Oct 2012, the service credit would count, yes. In addition, the 85 year rule is particularly generous for deferreds since 'notional' service from date of leaving to retirement counts too. Moreover, unlike the reckonable service for benefit purposes, any part time working is irrelevant (i.e. you count calendar years).

So, age (60) + actual service (16) + notional service (4) leaves only needing to have had a transfer in credit of 5 years to reach the 85 year rule at 60. Born in '59, she therefore has full protection for all pre-08 service + tapered protection for the remainder (see here for the gory details: http://lgpslibrary.org/assets/gas/ew/85YRv1.12c.pdf).

bjorn_toby_wilde

Thanks very much folks,

That explains it all very well indeed.