Calculating additional LGPS contributions to retire early

Johnnyboy11

R85 ended in April 2008, so about 7 years of your service will have R85 protection, once you meet the criteria (age + full years of membership = 85 or higher). If you leave at age 55, you could defer starting your pension until your meet R85 (deferred years also count). Worth looking into and doing the sums.

Westertonbilly

Escapar2020 said:

Westertonbilly said:

Would running a SIPP alongside your LGPS and Avcs not be an option worth considering? Use that from 55 to a point at which LGPS reductions are palatable?

Thanks, Yes I've thought about that too, but I'm still not sure how much I'd need to contribute every month to achieve a particular income at a particular age

Need to work out how much you need first. If you were leaving LGP until 60 you obviously need 35 × 5 if you want to go at 55, and want 35 a year, so 175. You have 8 years to accumulate that so 22 a year contributions required, give or take so some potential growth but relatively short timescales. Big numbers. Does you LGPS administrator off an online modeller to see what you would get at various optional points to draw the LG pension?

Escapar2020

Westertonbilly said:

Escapar2020 said:

Westertonbilly said:

Would running a SIPP alongside your LGPS and Avcs not be an option worth considering? Use that from 55 to a point at which LGPS reductions are palatable?

Thanks, Yes I've thought about that too, but I'm still not sure how much I'd need to contribute every month to achieve a particular income at a particular age

Need to work out how much you need first. If you were leaving LGP until 60 you obviously need 35 × 5 if you want to go at 55, and want 35 a year, so 175. You have 8 years to accumulate that so 22 a year contributions required, give or take so some potential growth but relatively short timescales. Big numbers. Does you LGPS administrator off an online modeller to see what you would get at various optional points to draw the LG pension?

I'd love to use an online tool if there is one? My administrator doesn't have an online modeller and won't calculate it for, ebecause they think it's too far off and they don't have the time! They focus on telling me that my income would reduce significantly if I take it early, which I understand. But if the reduced income is enough for me, why would I wait to 68!?

My monthly contribution to the LGPS is just over 400, plus employer contribution. I've just started making AVCs at 1400 per month, I might lower that later once I see if my take home pay is close to what I've predicted. 

My pension statement, which is due soon, sets out what my income would be at NPA, but I'd really like to know how much is invested after almost 20 years of contributions, any idea how I find that?

Escapar2020

Johnnyboy11 said:

R85 ended in April 2008, so about 7 years of your service will have R85 protection, once you meet the criteria (age + full years of membership = 85 or higher). If you leave at age 55, you could defer starting your pension until your meet R85 (deferred years also count). Worth looking into and doing the sums.

So I think I'd need to be age 78 with 7 years of contributions to meet R85?

Retireinten

What have you accrued already in the LGPS to date and how many years service and final salary do you have with R85 protection?

You can take this information and apply the actuarial reduction applicable at 55 to see what you're worth now. But if you do have any R85 protection you will forfeit this if you access your LGPS before 60. I am taking my LGPS at 60 due to this! 

You can estimate how much additional pension you can accrue to 55 by calculating 1/49th of your annual salary then applying the acturial reduction... now how far away are you from £35k?

Research APC's.  You pay either a lump sum or monthly amount to boost your annual pension. But this is subject to acturial reduction if you take your LGPS early and the costs feel fairly steep to me so I've ruled this out for now. 

With AVC's you grow a pot and depending on the value, this can be used to boost your tax free lumpsum...there are various options at retirement, so read up on these. 

In other words, visit the LGPS pension site and start researching your options and using the various calculators available to you. 

Taking my circumstances as an example: I am 45, a long standing member of the LGPS, plans to retire at 55 with an income of £35k net... sound familiar? Key difference is that £35k net is for a couple so I am not completely reliant on my LGPS to achieve this - my aim is to contribute half of this amount to 60 then half or more from 60 onwards. I have decided to take my LGPS at 60 to make use of R85 and I am saving into a mix of ISAs and private pensions to plug the gap before 60. I will be paying into AVCs at some point to max my tax free lumpsum. I have accrued to date an annual LGPS pension of £14k per annum (today's money) plus £21k lumpsum at 60...after acturial reduction! Every year, I add around £600 to my annual pension (after acturial reduction) so, put very simply, I can add another £6k to my LGPS by 55, making £20k. My retirement planning is always based on what I have 'in the LGPS bag' though as I am cautious and I have concerns over job security.  To put this all into context my salary is just below £50k and I have around 11 years in the 2008 scheme (on a slightly higher salary), approx 23 years in the scheme altogether

Retirement planning is a bit like a puzzle. Even with a good chunk of income coming from a DB scheme its unlikely that your entire retirement income will come from just that one source, particularly if you retire at 55... unless you are very high LGPS earner or are a high LGPS earner that manages to get made redundant at 55!

Johnnyboy11

Escapar2020 said:

Johnnyboy11 said:

R85 ended in April 2008, so about 7 years of your service will have R85 protection, once you meet the criteria (age + full years of membership = 85 or higher). If you leave at age 55, you could defer starting your pension until your meet R85 (deferred years also count). Worth looking into and doing the sums.

So I think I'd need to be age 78 with 7 years of contributions to meet R85?

Nope, from what you've posted you've already got 47+20 (age + membership) towards R85, and each year going forward you'll be one year older and have one more year of scheme menbership. So you'll qualify for R85 around age 56 or 57. The calc goes: 47+(85-47-20)/2

I'm not sure I agree with the above post about forfeiting R85 protection if you access the LGPS before age 60. I've looked into this and used my ex employers online calculator to double check, and R85 protection still applies but only from NRA to age 60 (normal actuarial reductions apply only from age 55 to 60).

Silvertabby

Johnnyboy11 said:

Escapar2020 said:

Johnnyboy11 said:

R85 ended in April 2008, so about 7 years of your service will have R85 protection, once you meet the criteria (age + full years of membership = 85 or higher). If you leave at age 55, you could defer starting your pension until your meet R85 (deferred years also count). Worth looking into and doing the sums.

So I think I'd need to be age 78 with 7 years of contributions to meet R85?

Nope, from what you've posted you've already got 47+20 (age + membership) towards R85, and each year going forward you'll be one year older and have one more year of scheme menbership. So you'll qualify for R85 around age 56 or 57. The calc goes: 47+(85-47-20)/2

I'm not sure I agree with the above post about forfeiting R85 protection if you access the LGPS before age 60. I've looked into this and used my ex employers online calculator to double check, and R85 protection still applies but only from NRA to age 60 (normal actuarial reductions apply only from age 55 to 60).

Even if OP meets R85 at 56/57, it is still linked to a minimum retirement age of 60.
So, if OP took his benefits at 60, his pre 2008 accrual wouldn't be reduced be reduced for early payment.

Take them from age 55, however, and his pre 2008 benefits would be reduced by the 5 years early factor - about 22%.

Add:  Yes, I know the regs say that benefits may be taken without reduction from R85/ pre age 60, but only with employer consent.  And that would involve the employer shovelling a heap of money into the fund.  Hens, rare and teeth spring to mind.

Escapar2020

Johnnyboy11 said:

Escapar2020 said:

Johnnyboy11 said:

R85 ended in April 2008, so about 7 years of your service will have R85 protection, once you meet the criteria (age + full years of membership = 85 or higher). If you leave at age 55, you could defer starting your pension until your meet R85 (deferred years also count). Worth looking into and doing the sums.

So I think I'd need to be age 78 with 7 years of contributions to meet R85?

Nope, from what you've posted you've already got 47+20 (age + membership) towards R85, and each year going forward you'll be one year older and have one more year of scheme menbership. So you'll qualify for R85 around age 56 or 57. The calc goes: 47+(85-47-20)/2

I'm not sure I agree with the above post about forfeiting R85 protection if you access the LGPS before age 60. I've looked into this and used my ex employers online calculator to double check, and R85 protection still applies but only from NRA to age 60 (normal actuarial reductions apply only from age 55 to 60).

Should your employer's calculator work the same for any lgps? Mine doesn't have one

ZeroSum

Escapar2020 said:

Johnnyboy11 said:

Escapar2020 said:

Johnnyboy11 said:

R85 ended in April 2008, so about 7 years of your service will have R85 protection, once you meet the criteria (age + full years of membership = 85 or higher). If you leave at age 55, you could defer starting your pension until your meet R85 (deferred years also count). Worth looking into and doing the sums.

So I think I'd need to be age 78 with 7 years of contributions to meet R85?

Nope, from what you've posted you've already got 47+20 (age + membership) towards R85, and each year going forward you'll be one year older and have one more year of scheme menbership. So you'll qualify for R85 around age 56 or 57. The calc goes: 47+(85-47-20)/2

I'm not sure I agree with the above post about forfeiting R85 protection if you access the LGPS before age 60. I've looked into this and used my ex employers online calculator to double check, and R85 protection still applies but only from NRA to age 60 (normal actuarial reductions apply only from age 55 to 60).

Should your employer's calculator work the same for any lgps? Mine doesn't have one

It should do given its the same rules 

Escapar2020

Retireinten said:

What have you accrued already in the LGPS to date and how many years service and final salary do you have with R85 protection?

You can take this information and apply the actuarial reduction applicable at 55 to see what you're worth now. But if you do have any R85 protection you will forfeit this if you access your LGPS before 60. I am taking my LGPS at 60 due to this! 

You can estimate how much additional pension you can accrue to 55 by calculating 1/49th of your annual salary then applying the acturial reduction... now how far away are you from £35k?

Research APC's.  You pay either a lump sum or monthly amount to boost your annual pension. But this is subject to acturial reduction if you take your LGPS early and the costs feel fairly steep to me so I've ruled this out for now. 

With AVC's you grow a pot and depending on the value, this can be used to boost your tax free lumpsum...there are various options at retirement, so read up on these. 

In other words, visit the LGPS pension site and start researching your options and using the various calculators available to you. 

Taking my circumstances as an example: I am 45, a long standing member of the LGPS, plans to retire at 55 with an income of £35k net... sound familiar? Key difference is that £35k net is for a couple so I am not completely reliant on my LGPS to achieve this - my aim is to contribute half of this amount to 60 then half or more from 60 onwards. I have decided to take my LGPS at 60 to make use of R85 and I am saving into a mix of ISAs and private pensions to plug the gap before 60. I will be paying into AVCs at some point to max my tax free lumpsum. I have accrued to date an annual LGPS pension of £14k per annum (today's money) plus £21k lumpsum at 60...after acturial reduction! Every year, I add around £600 to my annual pension (after acturial reduction) so, put very simply, I can add another £6k to my LGPS by 55, making £20k. My retirement planning is always based on what I have 'in the LGPS bag' though as I am cautious and I have concerns over job security.  To put this all into context my salary is just below £50k and I have around 11 years in the 2008 scheme (on a slightly higher salary), approx 23 years in the scheme altogether

Retirement planning is a bit like a puzzle. Even with a good chunk of income coming from a DB scheme its unlikely that your entire retirement income will come from just that one source, particularly if you retire at 55... unless you are very high LGPS earner or are a high LGPS earner that manages to get made redundant at 55!

Thanks
It's like trying to do a puzzle in thick fog! Where do I find the actuarial reduction rate for different ages?