Calculating additional LGPS contributions to retire early

ZeroSum

Escapar2020 said:

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?

https://www.lgpsmember.org/more/reductions.php

Escapar2020

ZeroSum said:

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 

Can you point me to it? Thanks 

Retireinten

When I work out my reduced pension, I don't deduct anything from my 2008 scheme benefits (because I plan on taking my LGPS when R85 kicks in at 60), I deduct 22.2% from my 2014 benefits as I'm taking this 5 years earlier than the scheme pension age of 65 and I deduct 32.1% from the care scheme benefits as I am taking this 8 years earlier than what I expect my normal pension age will be (68).

When estimating my annual pension increase I calculate 1/49th of my annual salary then reduce this by 32.1%.

If I were to take my LGPS at 55 I would have to deduct 37.7% from my 2008 and 2014 scheme benefits (as I would be taking them 10 years earlier than scheme retirement age) and 46.3% from my care scheme benefits (13 years early). 

There are reductions applied to your 2008 lump sum too (the link should tell you what they are). 

Retireinten

How much pension planning have you actually done, OP? It seems you've worked out your annual income requirements of £35k but it might be worth sense checking this to make sure you're not overestimating your retirement income requirements. 

We have settled on £35k net for a couple based on our current household spend (family of 4 including two teens) less any debt/mortgage repayments and work expenses that will stop in retirement, plus a fairly healthy contingency.  I include 2 x state pensions in my retirement calculations also from 68 also. 

I came onto this site 5 years ago with the objective of retiring at 55 on £30k a year (now increased to £35k) but without the foggiest idea how to fund each year or where my gaps were in retirement saving. I now have a very simple spreadsheet that tracks my various income sources from 55. I still have gaps but I knwo what they are, for instance we need to fund years 55-58 outside of pensions, so we have an ISA savings target to cover the £35k for those years, I have a gap in my retirement savings for years 58-60 so I have a target to save into a private pension to cover this.

We have a lumpsum savings target too and the AVC scheme will play a role in achieving this target.

Westertonbilly

Retireinten said:

How much pension planning have you actually done, OP? It seems you've worked out your annual income requirements of £35k but it might be worth sense checking this to make sure you're not overestimating your retirement income requirements. 

We have settled on £35k net for a couple based on our current household spend (family of 4 including two teens) less any debt/mortgage repayments and work expenses that will stop in retirement, plus a fairly healthy contingency.  I include 2 x state pensions in my retirement calculations also from 68 also. 

I came onto this site 5 years ago with the objective of retiring at 55 on £30k a year (now increased to £35k) but without the foggiest idea how to fund each year or where my gaps were in retirement saving. I now have a very simple spreadsheet that tracks my various income sources from 55. I still have gaps but I knwo what they are, for instance we need to fund years 55-58 outside of pensions, so we have an ISA savings target to cover the £35k for those years, I have a gap in my retirement savings for years 58-60 so I have a target to save into a private pension to cover this.

We have a lumpsum savings target too and the AVC scheme will play a role in achieving this target.

Retireinten said:

How much pension planning have you actually done, OP? It seems you've worked out your annual income requirements of £35k but it might be worth sense checking this to make sure you're not overestimating your retirement income requirements. 

We have settled on £35k net for a couple based on our current household spend (family of 4 including two teens) less any debt/mortgage repayments and work expenses that will stop in retirement, plus a fairly healthy contingency.  I include 2 x state pensions in my retirement calculations also from 68 also. 

I came onto this site 5 years ago with the objective of retiring at 55 on £30k a year (now increased to £35k) but without the foggiest idea how to fund each year or where my gaps were in retirement saving. I now have a very simple spreadsheet that tracks my various income sources from 55. I still have gaps but I knwo what they are, for instance we need to fund years 55-58 outside of pensions, so we have an ISA savings target to cover the £35k for those years, I have a gap in my retirement savings for years 58-60 so I have a target to save into a private pension to cover this.

We have a lumpsum savings target too and the AVC scheme will play a role in achieving this target.

Would SIPPs, with the taxmans +25% free, be worth considering as part of the 55-58 strategy, to use against your tax free £12500 or so?

Retireinten

Westertonbilly said:

Would SIPPs, with the taxmans +25% free, be worth considering as part of the 55-58 strategy, to use against your tax free £12500 or so?

There have been Government plans to align access to private pensions to 10 years before SPA for a while now, so I am working on the basis I won't be able to access any private pensions until 57/58.  If that rule doesn't come in, I will definately increase my contributions and access these earlier to make use of my personal tax allowance.  I am trying to minimise tax paid now and during retirement where I can but without paying too much into one type of savings, just because its tax efficient, but at the expense of my overall plan to fund retirement from 55.  I could sacrifice my ISA savings now and gain tax relief by paying this into a private pension but then I wouldn't be able to afford to retire at 55 (assuming the rules change obviously). 

Escapar2020

Retireinten said:

How much pension planning have you actually done, OP? It seems you've worked out your annual income requirements of £35k but it might be worth sense checking this to make sure you're not overestimating your retirement income requirements. 

We have settled on £35k net for a couple based on our current household spend (family of 4 including two teens) less any debt/mortgage repayments and work expenses that will stop in retirement, plus a fairly healthy contingency.  I include 2 x state pensions in my retirement calculations also from 68 also. 

I came onto this site 5 years ago with the objective of retiring at 55 on £30k a year (now increased to £35k) but without the foggiest idea how to fund each year or where my gaps were in retirement saving. I now have a very simple spreadsheet that tracks my various income sources from 55. I still have gaps but I knwo what they are, for instance we need to fund years 55-58 outside of pensions, so we have an ISA savings target to cover the £35k for those years, I have a gap in my retirement savings for years 58-60 so I have a target to save into a private pension to cover this.

We have a lumpsum savings target too and the AVC scheme will play a role in achieving this target.

I've been trying to get my head around planning for a while now. Every time I learn something, I forget something else!
I'm working on £35k pretax income for two of us, but I'm the only one with a pension. One thing I keep forgetting to account for is the state pension, so I think that would reduce my LGPS requirement to around £26k per year. I'm eagerly awaiting my 19/20 pension statememt (something I never thought I would say!). My 18/19 statement said I'd have £19K at NPA if I stopped contributing, but if I kept contributing upto NPA it would be 44k, but I don't plan to be working upto NPA. I know if o went at 55 that these amounts would almost halve. 
I've started making AVCs in August this year. I think my AVC is quite high at £1400 per month, but want to make sure I put enough in this year to mitigate my higher rate tax. I understand that there are some benefits of an AVC over a SIPP for the tax free lump sum? I think I will reduce my AVC to £600 before the end of this year and put the remaining £800 into a SIPP to give some flexibility before taking my LGP. 
The biggest uncertainty is the impact of covid19 on future council budgets, there could be some cuts and redundancies in the next couple of years possibly, which would change any plans I make but it's best to have a plan I think.

Escapar2020

Retireinten said:

Westertonbilly said:

Would SIPPs, with the taxmans +25% free, be worth considering as part of the 55-58 strategy, to use against your tax free £12500 or so?

There have been Government plans to align access to private pensions to 10 years before SPA for a while now, so I am working on the basis I won't be able to access any private pensions until 57/58.  If that rule doesn't come in, I will definately increase my contributions and access these earlier to make use of my personal tax allowance.  I am trying to minimise tax paid now and during retirement where I can but without paying too much into one type of savings, just because its tax efficient, but at the expense of my overall plan to fund retirement from 55.  I could sacrifice my ISA savings now and gain tax relief by paying this into a private pension but then I wouldn't be able to afford to retire at 55 (assuming the rules change obviously). 

Sounds like a good plan to me!

german_keeper

"I'm working on £35k pretax income for two of us, but I'm the only one with a pension".

If your spouse/partner has potentially no retirement income it's probably worth putting any extra contributions into a pension for him/her. As it stands you are going to be missing out on £12,500 tax free income.

Escapar2020

german_keeper said:

"I'm working on £35k pretax income for two of us, but I'm the only one with a pension".

If your spouse/partner has potentially no retirement income it's probably worth putting any extra contributions into a pension for him/her. As it stands you are going to be missing out on £12,500 tax free income.

How does that work? Does it matter if they're self employed?