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LGPS forecast

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Comments

  • sevenhills
    sevenhills Posts: 5,938 Forumite
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    AlanP_2 said:
    As explained in earlier posts - The £4,079 annual pension is how much it will be worth at 65/66 (pre-2014 and post-2014 have different Normal Retirement Ages) assuming you left your employer on 31st March (the statement date) and just left it alone until 65/66.
    That is quite some projection. I notice that a recent early leavers scheme offered me roughly that level of pay. So the other pension contributions pay for people to leave early. I almost wished that I had taken it. If there is another one, I probably would, might have missed the boat. Thanks all

  • hyubh
    hyubh Posts: 3,744 Forumite
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    AlanP_2 said:
    As explained in earlier posts - The £4,079 annual pension is how much it will be worth at 65/66 (pre-2014 and post-2014 have different Normal Retirement Ages) assuming you left your employer on 31st March (the statement date) and just left it alone until 65/66.
    That is quite some projection. I notice that a recent early leavers scheme offered me roughly that level of pay. So the other pension contributions pay for people to leave early. 
    No, that isn't the case. If you are alluding to a redundancy offer that included an early retirement, then the employer pays a 'strain charge' to the pension fund in lieu of an actuarial reduction being applied to the pension.
  • sevenhills
    sevenhills Posts: 5,938 Forumite
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    hyubh said:
    No, that isn't the case. If you are alluding to a redundancy offer that included an early retirement, then the employer pays a 'strain charge' to the pension fund in lieu of an actuarial reduction being applied to the pension.
    I actually applied for the early leavers initiative, thinking that they would not let me go, as they had recently employed 12 new staff in my role.
    I would have got the same pension 6 years early and £7,000 - I still cannot work out the logic of giving people thousands to leave, yet employing more staff in the same role.

  • MX5huggy
    MX5huggy Posts: 7,168 Forumite
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    hyubh said:
    No, that isn't the case. If you are alluding to a redundancy offer that included an early retirement, then the employer pays a 'strain charge' to the pension fund in lieu of an actuarial reduction being applied to the pension.
    I actually applied for the early leavers initiative, thinking that they would not let me go, as they had recently employed 12 new staff in my role.
    I would have got the same pension 6 years early and £7,000 - I still cannot work out the logic of giving people thousands to leave, yet employing more staff in the same role.

    They could of been looking to back fill your role with someone in the redeployment pool. 

    Then there are certain people who will always be allowed to leave. 
  • Retireinten
    Retireinten Posts: 260 Forumite
    Fourth Anniversary 100 Posts Name Dropper
    jamesd said:
    In general, one way to efficiently manage early retirement from a defined benefit pension like LGPS is to pay into a personal pension then draw on that and eventually take the DB pension at the scheme normal pension age, or R85 if that applies.

    The reason this is efficient is that it reduces or eliminates the actuarial reduction for taking the pension early. 

    Since you're 59 now you're already above the 55 age where you can take money out of personal pensions. You can do this in three main ways:

    1. Up to three times in your life you can take all of a pot worth up to £10k as a small pot. This payment will be 25% tax free and 75% taxable. This does not trigger the MPAA and there are no restrictions on recycling the tax free or taxable part into more pension contributions.

    2. You can take any portion of the pot using UFPLS. This payment is 25% tax free and 75% taxable. This triggers the MPAA and limits you to no more than £4,000 of pension contributions per year into defined contribution pensions - those with investments you can see and control; DB aren't affected. There are no restrictions on recycling the taxable part into more pension contributions. There are limits on recycling the tax free part, the easiest one being that it's within the rules to take up to £7,500 tax free from all types except 1 per rolling twelve month period (not tax or calendar year) and recycle any of that.

    3. You can take a tax free lump sum of 25% from any portion of the pot and place the remaining 75% into a flexi-access drawdown account to be taken as taxable income later. Taking the 25% doesn't trigger the MPAA, taking any of the taxable part does. The taxable part has no recycling restrictions, the tax free part is part of the same restrictions as the tax free part in 2.

    This means that you can take out a substantial amount of personal pension money even while still working. It typically makes it a good idea to put most savings into a pension since access us now easy. For personal contributions you're limited to paying in a gross amount equal to your gross pay. That"s a net amount equal to your gross pay times 0.8.

    Because you are likely to spend some time not working and not getting the DB or state pensions it's likely that you'll be able to use method 3 to take out the taxable part free of tax inside your income tax personal allowance. While still working you can use method 1 up to three times, then just the tax free withdrawing part of 3.
    Hope you don't mind a follow up question on these options JamesD.


    Can you use a mix of option 2 and 3 on the same pot please?  


    So as an example, if I want to drawdown £19,000 a year for the first 10 years could I use UFPLS to drawdown £16,760, of which 25% will be tax free, and the remaining £12,570 would be covered by my personal tax allowance?


    Could I also take a 25% tax free lump sum from the same pot of £2,240 and move the remaining 75% (£6,720) to a flexi access pot to drawdown at a later date?  From what I've pieced together on this forum, the £6,720 is then crystallised and will be taxable on drawdown, even if it grows, a further 25% tax free lump sum will not be paid on the growth.



    I think this would create a tax free income of £19k in the years before SPA, when we most need it.   This would also leave the bulk of our pension uncrystalised in the early years to benefit from any growth and subsequently larger tax free lump sums. 
  • Silvertabby
    Silvertabby Posts: 10,331 Forumite
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    OldBeanz said:
    My wife - late 50's - asked to buy more pension. She was told she needed to take a medical. Her doctor's secretary suggested the doctor had better things to be doing at present. The LGPS relented. One might imagine someone in their 20's would not have been asked or is everyone who buys extra pension subject to a medical?
    I started buying extra pension via APCs last summer (I'm in my mid 30s). In the APC pack there was some documentation for my doctor to sign that I was likely to be well enough to work for the term of the additional contributions. 

    I dropped the form off at the surgery and made an appointment for a telephone consultation with the doctor. The call took about five minutes, then I had to go back to the surgery to pick up the signed form. They did charge me twenty quid though as apparently it is classed as private work.
    The medical form asks the GP to confirm that they know of no (medical) reason why the APC applicant won't complete the term of their APC contract.

    Briefly, a medical is required when the APC is taken out for £XX of annual pension to be paid for in monthly instalments.  If the LGPS member leaves before completing the contractual payments, then they only get what they have paid for.  The added pension is also reduced for early payment, even if the reason for leaving is redundancy. 

    On the other hand, if the reason for leaving is ill health, the the whole of the APC is payable.  Human nature being what it is, these rules were largely set in place to prevent someone from taking out the maximum contract (over £7K per year of index linked pension) and then applying for ill health retirement.

    In the case of OldBeanz's wife, I expect that the combination of her age, her application for a lesser amount of APC (I assume) , and Covid were taken into account when removing the medical requirement - but I can't see the LGPS taking the same stance in the case of a 30 year old buying the full whack.


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