LGPS (police)

GunJack

lisyloo said:

Dazed_and_C0nfused said:

lisyloo said:

ZeroSum said:

Salary sacrifice isn't allowed in public sector. 

The accrual rate is 1/49th's of career average salary. 
What do you mean by 6% employer contributions? 
The employer contributions are largely irrelevant as its defined benefit, but typically they're circa 20%
The employee contributions are below
https://www.lgpsmember.org/toj/thinking-joining-how.php

6% of salary into dc means if I earn say £50k then my employer puts £3k into my personal pot. (I’m sure you knew that just making sure we’re talking about the same thing).

right so will it still be circa 20% if a few years off retirement and work for say 3 years?
the circa is really useful

What the employer contributes is of no real relevance to you though.  

You aren't building up a pension pot, the LGPS is a promise to pay the pension you accrue.

I’m trying to compare a job with dc pension (current job) with a new proposed job with db pension.
That’s why I’m trying to convert db to dc so I can compare.
so to put numbers on it.

dc job = £50k salary + £3k employer contributions = £53k
db job = £38k salary + £7.6k pension equivalent - £2470 pension cost = £43130

does that look approx correct?

if it’s correct then the generous pension does not make up for the poor salary 

..but the db won't ever run out in your lifetime, be it for 10, 20, 30 years. If all you have is DC currently, this db could be a valuable known income going forwards...

OldBeanz

lisyloo said:

Dazed_and_C0nfused said:

lisyloo said:

ZeroSum said:

Salary sacrifice isn't allowed in public sector. 

The accrual rate is 1/49th's of career average salary. 
What do you mean by 6% employer contributions? 
The employer contributions are largely irrelevant as its defined benefit, but typically they're circa 20%
The employee contributions are below
https://www.lgpsmember.org/toj/thinking-joining-how.php

6% of salary into dc means if I earn say £50k then my employer puts £3k into my personal pot. (I’m sure you knew that just making sure we’re talking about the same thing).

right so will it still be circa 20% if a few years off retirement and work for say 3 years?
the circa is really useful

What the employer contributes is of no real relevance to you though.  

You aren't building up a pension pot, the LGPS is a promise to pay the pension you accrue.

I’m trying to compare a job with dc pension (current job) with a new proposed job with db pension.
That’s why I’m trying to convert db to dc so I can compare.
so to put numbers on it.

dc job = £50k salary + £3k employer contributions = £53k
db job = £38k salary + £7.6k pension equivalent - £2470 pension cost = £43130

does that look approx correct?

if it’s correct then the generous pension does not make up for the poor salary 

It depends on how secure you want your pension. The benefits of a db pension include being able to forget how your money is 'invested' as the LGPS takes care of that and will pay you whatever happens (if the LGPS stops paying pensions then we would all be in trouble).
The LGPS tends to offer very generous transfer-in terms from dc pensions although you would have to check your employer but you may have hit the jackpot depending on how much dc you have.
Most also allow you to pay into an AVC whereby you can take 25% cash on top of this.
If you search further on this site you will find many a person wishing they had a Govt Based DB pension. 

Dazed_and_C0nfused

That’s why I’m trying to convert db to dc so I can compare.

I don't think you can really do that.

dc job = £50k salary + £3k employer contributions = £53k
db job = £38k salary + £7.6k pension equivalent - £2470 pension cost = £43130

Don't really understand that to be honest.

What is the + £7.6k pension equivalent??

If your job with LGPS pays £38k then you will be contributing £2,584 gross, £2067 after tax relief so a net cost per month of £172.

In return you will accrue a pension of £775.

Silvertabby

Dazed_and_C0nfused said:

That’s why I’m trying to convert db to dc so I can compare.

I don't think you can really do that.

dc job = £50k salary + £3k employer contributions = £53k
db job = £38k salary + £7.6k pension equivalent - £2470 pension cost = £43130

Don't really understand that to be honest.

What is the + £7.6k pension equivalent??

If your job with LGPS pays £38k then you will be contributing £2,584 gross, £2067 after tax relief so a net cost per month of £172.

In return you will accrue a pension of £775.

Is this the surprisingly very common mistake of thinking:

"This pension is no good - I'm paying in £2067 a year in contributions, but only getting £775 pension"

Answer:  You pay £2067 once.  In return you get £775 a year, every year, for the rest of your life

lisyloo

GunJack said:

lisyloo said:

Dazed_and_C0nfused said:

lisyloo said:

ZeroSum said:

Salary sacrifice isn't allowed in public sector. 

The accrual rate is 1/49th's of career average salary. 
What do you mean by 6% employer contributions? 
The employer contributions are largely irrelevant as its defined benefit, but typically they're circa 20%
The employee contributions are below
https://www.lgpsmember.org/toj/thinking-joining-how.php

6% of salary into dc means if I earn say £50k then my employer puts £3k into my personal pot. (I’m sure you knew that just making sure we’re talking about the same thing).

right so will it still be circa 20% if a few years off retirement and work for say 3 years?
the circa is really useful

What the employer contributes is of no real relevance to you though.  

You aren't building up a pension pot, the LGPS is a promise to pay the pension you accrue.

I’m trying to compare a job with dc pension (current job) with a new proposed job with db pension.
That’s why I’m trying to convert db to dc so I can compare.
so to put numbers on it.

dc job = £50k salary + £3k employer contributions = £53k
db job = £38k salary + £7.6k pension equivalent - £2470 pension cost = £43130

does that look approx correct?

if it’s correct then the generous pension does not make up for the poor salary 

..but the db won't ever run out in your lifetime, be it for 10, 20, 30 years. If all you have is DC currently, this db could be a valuable known income going forwards...

True, but as I’m a few years off retirement it would be a relatively small guarantee. I agree though.

Retireinten

With a DB scheme, you don't add to a pot. You essentially build up an amount of money each year that will be paid out annually for life when you retire. So using the £38k salary you quote, you will  build an annual pension of £775 (1/49ths of £38k) for every year you are in the scheme.  So let's assume you work for two years in the LGPS (the minimum vesting period) creating an annual pension of £1,550 for those two years, you take this pension at 67 and you live to 80 (lower end of average life expectancy) - you will receive 13 x £1,550 = £20,150 from those two years being in the LGPS.  That compares to the £6k you would have built up from your employer contributions in a DC scheme!  To be a member of the LGPS you have to pay in 6.8% of your salary, which would be an annual cost to you of net (approx) £2,060. So let's say you add the gross value of your LGPS contributions into your DC to take into account of the cost of the scheme to you.  So now you're comparing £20,150 to £11,150 in the DC for those two years.    

There are other things to consider too, such as: LGPS is guaranteed and inflation proof so no risk to you at all, there is a widows pension and although there's always a risk you drop dead in your early seventies and receive less than my example, this pension pays out for life and your life could last well into your 90's. 

Only you can decide if these benefits are worth the reduced pay! 

Retireinten

I meant to add that the DC could grow in value but equally the risk sits with you and there are no guarantees... 

Dazed_and_C0nfused

Silvertabby said:

Dazed_and_C0nfused said:

That’s why I’m trying to convert db to dc so I can compare.

I don't think you can really do that.

dc job = £50k salary + £3k employer contributions = £53k
db job = £38k salary + £7.6k pension equivalent - £2470 pension cost = £43130

Don't really understand that to be honest.

What is the + £7.6k pension equivalent??

If your job with LGPS pays £38k then you will be contributing £2,584 gross, £2067 after tax relief so a net cost per month of £172.

In return you will accrue a pension of £775.

Is this the surprisingly very common mistake of thinking:

"This pension is no good - I'm paying in £2067 a year in contributions, but only getting £775 pension"

Answer:  You pay £2067 once.  In return you get £775 a year, every year, for the rest of your life

I did wonder that but the op is a regular and seems quite money savvy so I discounted that but maybe you're right 

If a basic rate taxpayer in retirement then that £2,067 has paid for itself and you are in pure profit before the end of the fourth year of retirement 

And that's before taking into account any inflation proofing the LGPS no doubt has, spouse pension etc etc.

lisyloo

Dazed_and_C0nfused said:

That’s why I’m trying to convert db to dc so I can compare.

I don't think you can really do that.

dc job = £50k salary + £3k employer contributions = £53k
db job = £38k salary + £7.6k pension equivalent - £2470 pension cost = £43130

Don't really understand that to be honest.

What is the + £7.6k pension equivalent??

If your job with LGPS pays £38k then you will be contributing £2,584 gross, £2067 after tax relief so a net cost per month of £172.

In return you will accrue a pension of £775.

The £7.6k is the value of the “circa 20%” I.e. £38k * 20%.
My understanding of what you said is that he LGPS is worth approx 20% of annual salary. Is that what you meant?
if not do you have a suggestion how I can compare the two?

lisyloo

Silvertabby said:

Dazed_and_C0nfused said:

That’s why I’m trying to convert db to dc so I can compare.

I don't think you can really do that.

dc job = £50k salary + £3k employer contributions = £53k
db job = £38k salary + £7.6k pension equivalent - £2470 pension cost = £43130

Don't really understand that to be honest.

What is the + £7.6k pension equivalent??

If your job with LGPS pays £38k then you will be contributing £2,584 gross, £2067 after tax relief so a net cost per month of £172.

In return you will accrue a pension of £775.

Is this the surprisingly very common mistake of thinking:

"This pension is no good - I'm paying in £2067 a year in contributions, but only getting £775 pension"

Answer:  You pay £2067 once.  In return you get £775 a year, every year, for the rest of your life

I understand it’s 2% each year for life.
do you have a suggestion how to compare other than the “circa 20%” of salary I’m using?