LGPS or NHS pension

cathtcat

I am 53 and have had a LGPS local government pension since 2009, 11 years.  I have recently secured a job in the NHS and have the option of taking this job, and the LA recharging the NHS while I am employed there, or moving fully to the NHS.  I am trying to find out if it would be better to keep my pension with LGPS or if there is no benefit, move to the NHS.  I hope to make additional pension contributions or take out an AVC going forward, and wondered if the LGPS AVCs differ from NHS AVCs with regards to tax.   This is all very confusing to me so any advice would be appreciated. Tcat

saucer

There are fundamental differences between the NHS and LGPS pensions, but they are both excellent schemes that will provide you with a secure pension completely unmatched by any non defined benefit scheme.  I can't comment about how your pension would be valued if moved over to the NHS, but I wanted to point out that the AVCs between the two have a significant difference in that the LGPS AVC can be taken completely tax free if you organise it in such a way that it is less than 25% of the total value of your pension.  This in turn is determined by taking your annual pension x20 + your compulsory lump sum and your AVC value added together.  

Silvertabby

As you joined the LGPS after 2006 you have no R85 protections, which should simplify your decision.
You could ask for a quote before making your final decision. 

hyubh

cathtcat said:

I am 53 and have had a LGPS local government pension since 2009, 11 years.  I have recently secured a job in the NHS and have the option of taking this job, and the LA recharging the NHS while I am employed there, or moving fully to the NHS.  I am trying to find out if it would be better to keep my pension with LGPS or if there is no benefit, move to the NHS.

I wouldn't have the pension tail waging the job dog in this scenario - the two pension schemes aren't different enough. If you joined the NHS scheme and transferred in, it would be a 'Club' transfer with the final salary component of your LGPS pension purchasing a final salary service credit in the NHS scheme, and the CARE part getting a CARE pension credit in the NHS that however revalues the same as the LGPS.

With respect to the final salary part, it would be a credit in the 2008 section of the NHS scheme specifically, which happens to be extremely similar to LGPS 2008. So, the benefit would be, having exited the LGPS, maintaining an ongoing final salary link for your pre-April 2014 service. Conversely, if you never left local authority employment, you'd obviously maintain an ongoing final salary link by default anyway. So the contrast is less with that, than switching jobs and not transferring your now deferred LGPS pension.

xylophone

Remember that transfers out of an NHS pension into a flexible DC scheme would not be permitted.
It would be possible from LGPS.
This is something to bear in mind should you wish to retain the option.

cathtcat

saucer said:

There are fundamental differences between the NHS and LGPS pensions, but they are both excellent schemes that will provide you with a secure pension completely unmatched by any non defined benefit scheme.  I can't comment about how your pension would be valued if moved over to the NHS, but I wanted to point out that the AVCs between the two have a significant difference in that the LGPS AVC can be taken completely tax free if you organise it in such a way that it is less than 25% of the total value of your pension.  This in turn is determined by taking your annual pension x20 + your compulsory lump sum and your AVC value added together.  

Thank you this is really useful..  I apologise if I appear totally clueless but when you say taking your annual pension x20 what does the x20 refer to?

Much appreciated Tcat

Silvertabby

cathtcat said:

saucer said:

There are fundamental differences between the NHS and LGPS pensions, but they are both excellent schemes that will provide you with a secure pension completely unmatched by any non defined benefit scheme.  I can't comment about how your pension would be valued if moved over to the NHS, but I wanted to point out that the AVCs between the two have a significant difference in that the LGPS AVC can be taken completely tax free if you organise it in such a way that it is less than 25% of the total value of your pension.  This in turn is determined by taking your annual pension x20 + your compulsory lump sum and your AVC value added together.  

Thank you this is really useful..  I apologise if I appear totally clueless but when you say taking your annual pension x20 what does the x20 refer to?

Much appreciated Tcat

It's the formula for working out your maximum tax free lump sum.

20 x annual pension plus 1 x any automatic lump sum plus 1 x AVC fund = Y

Maximum tax free cash is 25% of Y.

However, note that if the maximum tax free cash exceeds the total of the lump sum plus AVC, and you do want the maximum, then you would have to commute (give up some of your annual pension for a higher lump sum) and the calculation would then have to factor in the commutation rate (1:12 in the case of the LGPS).