Multiple Pensions

cossie1990

Hi all,
After some advice...
Current situation, 31 years old been in LGPS for the last nine years and accruing nicely with nice projections etc. My current salary is c£42k.
I've seen another job advertised with a salary of £50-£55k which is a natural step up and can offer me some development going forward. The only issue nagging at me is that it isn't a part of the LGPS so I'm unsure whether to even apply.

I have a strange viewpoint on things like this whereby I like everything in one place and my worst nightmare (weird) would be to have multiple smaller pension pots and the feeling of having to start saving again from zero after working for the last 9 years to build a respectable amount. Call it OCD, but it feels like a very real barrier at the minute and I don't know why.

So, as a complete idiot when it comes to pensions - am I overthinking this? I've been led to believe that the LGPS is a good pension scheme vs other private ones and that it would be costly to transfer it into it if I could. How much consideration do you put into pension schemes when looking for new work?

Thank you!

ceh209

At least you realise how good a DB pension is, unusual for someone posting on here!
If you get a private sector job DO NOT transfer out the LGPS accrual you've built up. However I would say it shouldn't be a barrier at all to looking for a new job - I would bet the majority of people (who have at least one pension pot) have more than one pension pot. I myself have 2, having had 3 jobs in which I've accrued pension - I transferred 1, but left the others as the charges were lower. Just take it into account - so don't view a £50k salary as an £8k pay increase, as your new pension provision is likely to be 'worth' less. Good news is it looks like you'd stil be on for a true pay increase and potential for development, so I don't think it's an issue at all.

AskAsk

it is best not to transfer pension pots around.  they are fine left where they are and you can deal with them when you retire.  you just have to get over your OCD about having everything in one place.  i suffer from irrational thinking so i know exactly where you are coming from about OCD!

a higher salary is always good.  you can check what pension benefits are available from the new employer and make a decision on what difference between the two schemes.  if you are moving to a job in the public sector, then the pension won't be much different.

Doshwaster

Due to a few recent changes of jobs and company mergers I found myself with 5 small pensions each with under £10k in them. It really didn't make sense to keep them separate for another 20 years so I merged them together into a provider of my choice. However these were all private sector scheme with no exit penalties. I've never worked in the public sector but even I know that those are best left alone.

DoctorStrange

Maybe consider using your own spreadsheet to track your numbers so you can focus on the the total amount saved.

That way,  you're not "starting again from zero" and everything will still seem "in one place"

Savvy_Sue

I like having them in different places.

My LG scheme paid out at 60. It's not worth a lot, but useful. I have another which could start paying out this year, but I've told them to hang on to that until I hit state pension age.

And I've got the one to come from current job.

DH has several, some of which were final salary. We took advice, consolidated a couple, got one into payment, fiddled the amount after a year. Still looking good.

hyubh

cossie1990 said:

Current situation, 31 years old been in LGPS for the last nine years and accruing nicely with nice projections etc. My current salary is c£42k.
I've seen another job advertised with a salary of £50-£55k which is a natural step up and can offer me some development going forward. The only issue nagging at me is that it isn't a part of the LGPS so I'm unsure whether to even apply.

On a very rough basis, you can consider the effective employer contribution in the LGPS as c.25% of your pay (actual employer rate will vary, but a big feature of DB from the employer's POV is that money paid out when an employee is working may not be the end of it). So I'd consider that potential pay band no more than par for what you currently have. On the other hand, for the same reason I wouldn't just discount it.

I have a strange viewpoint on things like this whereby I like everything in one place

 While the word 'pension' is used for both, a public sector DB pension and a private sector DC one are very different things. While you can transfer out of the LGPS to a DC arrangement, it would be unusual for that to be a good idea (an inflation-proofed, taxpayer backed guaranteed income in retirement is not something to give up easily).

my worst nightmare (weird) would be to have multiple smaller pension pots and the feeling of having to start saving again from zero after working for the last 9 years to build a respectable amount. 

The value of most of your LGPS pension to date, being under the CARE scheme, is unaffected by you leaving or staying - it is what it is, and will increase by inflation regardless.

So, as a complete idiot when it comes to pensions - am I overthinking this?

No, the pension offering is an important part of the total renumeration package.

I've been led to believe that the LGPS is a good pension scheme vs other private ones

It most certainly is...

it would be costly to transfer it into it if I could

Transferring out a DB pension to a DC/money purchase arrangement when the CETV is over £30K will legally require you to take financial advice first.

Marcon

cossie1990 said:

I have a strange viewpoint on things like this whereby I like everything in one place and my worst nightmare (weird) would be to have multiple smaller pension pots and the feeling of having to start saving again from zero after working for the last 9 years to build a respectable amount. Call it OCD, but it feels like a very real barrier at the minute and I don't know why.

So, as a complete idiot when it comes to pensions - am I overthinking this? I've been led to believe that the LGPS is a good pension scheme vs other private ones and that it would be costly to transfer it into it if I could. How much consideration do you put into pension schemes when looking for new work?

Thank you!

That attitude is far more common than you might think, so you are not alone!

See if you can think slightly differently: the LGPS (a defined benefit scheme) forms a solid, guaranteed plank for your retirement years, together with the state pension. You've got the foundations, so now you can build up top of them, which isn't quite the same as 'starting again from zero'.

Whoever led you to believe the LGPS is a good scheme was dead right, so don't even think about transferring it anywhere, especially given your viewpoint.

cossie1990

Thanks for all your responses, definitely food for thought.

Just to put another spin on this - if I was to transfer from one LGPS provider to another what's the issue around that? I've been reading about 'the club' but still can't fully get my head around it. Would it essentially be the same as continuous service or would there be any penalties?

Thank you!

AskAsk

cossie1990 said:

Thanks for all your responses, definitely food for thought.

Just to put another spin on this - if I was to transfer from one LGPS provider to another what's the issue around that? I've been reading about 'the club' but still can't fully get my head around it. Would it essentially be the same as continuous service or would there be any penalties?

Thank you!

if you want to ask specific questions about pension, post on the pensions board.  there are lots of knowledgeble people on there about pensions.

hyubh

cossie1990 said:

Thanks for all your responses, definitely food for thought.

Just to put another spin on this - if I was to transfer from one LGPS provider to another what's the issue around that? I've been reading about 'the club' but still can't fully get my head around it. Would it essentially be the same as continuous service or would there be any penalties?

A 'Club' transfer is one between different public sector schemes (by the way: if this £50-£55k job is public sector, then that changes everything because different public sector pension schemes are similar in kind and overall generosity). The idea is to grant equivalent credits in the new scheme, so if you have a final salary benefits in the old, you get a final salary service credit in the new even though you will be joining a CARE scheme, with the service length adjusted for any different normal pension ages etc. Also any transferred in CARE pension would keep the active member revaluation rate of the old (although given other public sector schemes may have a higher revaluation rate than the LGPS, that bit isn't actually a positive for you).

That said, from a pension benefit point of view, transfers between LGPS funds ('interfund transfers') are treated not as Club transfers, but instead identically to aggregations within the same fund (e.g., you had a job with the local borough council, then left for another with the county council). So final salary service would be copied over like-for-like exactly, ditto any CARE accruals. That said, nowadays there is a 5 year limit on restored final pay links, whether between public sector schemes, or within one of them. So if you left the LGPS then rejoined more than 5 years later, an aggregation would involve a purchase of additional 'CARE' pension solely.

PS - when you say you've been a member for 9 years, does that mean you joined before 1 April 2012? Unless you've been on the equivalent of £42K for a long time, you could will be a beneficiary of the so-called 'McCloud' judgement (service between 2014 and 2022 being changed to final salary not CARE accrual, if better - won't actually be a boon for most LGPS members given the generosity of the CARE scheme, however I would guess your profile fits very well with benefiting). So very simplistically: a pension at age 65 of (£42K x 1/60 x 9) = £6,300 pa vs. whatever your next annual benefit statement says your total pension, mostly with a normal pension age of SPA (68 or whatever), is.