Lump sum to LGPS pension?

beecher2

I have 15k which was in a NS&I Direct Saver and am unsure what to do with it. I am 53 and have been a member of the Strathclyde Region LGPS scheme since 1993. Would it be worthwhile paying a lump sum into the pension? I'm debt free and would like to possibly retire at 62, which would I think mean I would get 15 years full pension (rule of 85) and 14 years reduced pension (around 77% of full pension). I am fed up chasing interest rates and do not want any risk. Putting it in my pension might not make the most money for me, and I'm not bothered about that, just want to know if it's a stupid thing to do! Thanks very much.

beecher2

Ah, just found a calculator if that helps.

Your Normal Pension Age (NPA)		67
Total extra pension to be bought		£ 1,199.04
Years of agreement		NA
Pension added to account each year of agreement		£ 1,199.04
Gross total Lump sum cost of pension being bought		£ 15,000.00
Lump sum Cost to employer		£ 0.00
Lump sum Cost to member before tax relief		£ 15,000.00
Based on a gross Lump sum cost of £1,251.00 per £100 of extra pension

Dazed_and_C0nfused

If those figures are correct then it seems like a good investment at 8% return once in payment.

Possibly quite a bit more depending on any tax relief you may be entitled to with this type of lump sum payment - roughly how much do you expect your P60 to show as your taxable income in the current tax year?

beecher2

Thanks very much.
Income is £31,460 and this is the calculator I used
https://www.lgpsmember.org/scotlgps2015/apc/extra.php?
I could put a lot more in than £15k if I wanted, I have inheritances which are just sitting there looking at me at the moment

beecher2

Ah, hold on 
The maximum amount of additional pension you can buy is £6923 per year (2020/21 rate). This figure will increase each year in line with the cost of living.

xylophone

Possibly quite a bit more depending on any tax relief you may be entitled to with this type of lump sum payment 

https://forums.moneysavingexpert.com/discussion/comment/77783248/#Comment_77783248

Dazed_and_C0nfused

beecher2 said:

Thanks very much.
Income is £31,460 and this is the calculator I used
https://www.lgpsmember.org/scotlgps2015/apc/extra.php?
I could put a lot more in than £15k if I wanted, I have inheritances which are just sitting there looking at me at the moment

Assuming you are Scottish resident for tax purposes you would get a tax reduction of just over £3k on the £15k but as xylophone has alluded to explaining this type of contribution (paid gross with no tax relief whatsoever at the point you make the payment) to HMRC can be a battle.

But it does make the extra pension even more attractive at 10% (from when it comes into payment).

beecher2

I'm so sorry for all these questions, I don't know why my brain freezes when it comes to pensions but it always has. I don't find that LGPS uses clear language and this is the point where I usually give up. I think I might need to get some professional help.  What is the difference between a and b please?https://www.lgpsmember.org/scotlgps2015/apc/extra.php

8(a).Pension

 Please enter the amount of pension you would like to purchase by lump sum up to a maximum of £6923 OR

8(b).Lump Sum

 Please enter the amount of lump sum you would like to pay in order to purchase extra pension - do not complete if you have completed field 8(a)

xylophone

 A bit like buying a car?

You can enter (a) the make and model you want (say the Maxo 6923).
or
(b) the purchase price (say £15,000).

beecher2

Oh thanks, I get it now. I think I've convinced myself it is more complicated than it is