LGPS - When is the best time to take my pension?

Gimmeaminute

I'm 53 and was made redundant from a local government job 3 years ago. I have a job with the NHS at the moment and am just considering the best time to start drawing my local government pension? I was in the old, old scheme from 1988, then the old scheme from 2008, then the newest scheme from 2014 to 2018.

I have used a pension calculator from the Civica website and looked at taking my pension at 55, 60, 65, 67 and 69. I also have a spreadsheet showing all options on the assumption I might live to 75, 80, 85 and 90. In pretty much every scenario the sweet spot seems to be to take the pension at 60, as even living till I am 90, none of the other options catch up in terms of cold hard cash I will receive, even taking 20% tax into account. It also seems in each case that there is no point accepting an enhanced lump sum in return for a reduced pension.

I still have a couple of years to decide what I want to do. Has anyone else found that 60 is definitely the right time and do you have any advice to help an old codger make up his mind?

Silvertabby

Gimmeaminute said:

I'm 53 and was made redundant from a local government job 3 years ago. I have a job with the NHS at the moment and am just considering the best time to start drawing my local government pension? I was in the old, old scheme from 1988, then the old scheme from 2008, then the newest scheme from 2014 to 2018.

I have used a pension calculator from the Civica website and looked at taking my pension at 55, 60, 65, 67 and 69. I also have a spreadsheet showing all options on the assumption I might live to 75, 80, 85 and 90. In pretty much every scenario the sweet spot seems to be to take the pension at 60, as even living till I am 90, none of the other options catch up in terms of cold hard cash I will receive, even taking 20% tax into account. It also seems in each case that there is no point accepting an enhanced lump sum in return for a reduced pension.

I still have a couple of years to decide what I want to do. Has anyone else found that 60 is definitely the right time and do you have any advice to help an old codger make up his mind?

Everyone is different, but in your case you will meet R85 in respect of your pre 2008 service at 60.  That's 20 years of unreduced pension.  Yes, your 2008 to 2014 service will be reduced for early payment before 65, and your post 2014 service will be reduced for payment before SPA - but taking your pension at 60 is certainly worth considering.

Gimmeaminute

Thanks Silvertabby. I think I always thought of a works pension as something that had to run its full term to age 65 or 67 and can't believe that the best solution by a mile is to take it at 60 with a few reductions here and there. Worked out that if I live till I'm 80, taking my pension at 60 means I will be 50k+ better off than waiting till 65. Just seems a bit strange which is why I thought I'd ask the experts on here if I have got it right??

saucer

Gimmeaminute said:

Thanks Silvertabby. I think I always thought of a works pension as something that had to run its full term to age 65 or 67 

60 was the retirement age before 2008 and as Silvertabby has said that part of your pension will be protected because of the combination of your age and years of membership under the 85 year rule https://www.lgpsmember.org/more/eightyfive.php

Gimmeaminute

Thanks saucer. Think I'm just trying to confirm that I have got my calculations right and that I am doing the right thing? Common sense to me says that the longer you defer your pension, the more you are going to get, however from what research I have done, this is not the case. By my calculations, if I leave at 60, I will get a shed load of cash. If I leave at most other ages I will need to live to 100 to get the same amount.
Has anyone been through the process that can confirm this?

hyubh

Gimmeaminute said:

Thanks saucer. Think I'm just trying to confirm that I have got my calculations right and that I am doing the right thing? Common sense to me says that the longer you defer your pension, the more you are going to get, however from what research I have done, this is not the case. By my calculations, if I leave at 60, I will get a shed load of cash. If I leave at most other ages I will need to live to 100 to get the same amount.
Has anyone been through the process that can confirm this?

Normal retirement age in the final scheme was (is) 65. What meeting the 85 year rule meant (and means) was being able to retire earlier without an actuarial reduction. So in your case, if you left it to your CARE scheme normal pension age of SPA, you would only receive an actuarial increase on your pre-08 pension from age 65 to retirement, not age 60 to retirement.

daveyjp

Thats how it is supposed to work.  You get less if you retire early as you will probably receive it for more years.

However its not about trying to 'get back' or breaking even etc, its about retiring at the point the income you receive is enough for you to live the life you would like in retirement.

I have friends who were happy to take LGPS at late 50s as they had other retirement income.  A family friend has just had his 68 birthday and next year will have 50 years LGPS service, he doesn't even talk of retirement.

So bottom line is do what works for you!

hyubh

daveyjp said:

Thats how it is supposed to work.  You get less if you retire early as you will probably receive it for more years.

However its not about trying to 'get back' or breaking even etc, its about retiring at the point the income you receive is enough for you to live the life you would like in retirement.

Well, the question is why 60 specifically appears so optimal, I think. And the answer to that is, the larger part of the pension gets no reduction at that age, yet is not boosted by retiring up to 5 years later, and is only boosted after that relative to an NRA of 65. Whereas the other two tranches of pension have broadly symmetrical early and late retirement factors (60ths pension: actuarial reduction if go before 65, actuarial increase if go after; CARE pension: actuarial reduction if go before SPA, actuarial increase if go after).

A family friend has just had his 68 birthday and next year will have 50 years LGPS service, he doesn't even talk of retirement.

On the one hand that means the benefit of the 85 year rule has just been lost. On the other, if 90s rules were still in place, he would have met maximum accrual limits many years ago. So purely from a pensions POV, swings and roundabouts. And more importantly, if he still enjoys his job, it makes sense not to give it up!

saucer

hyubh said:

Gimmeaminute said:

Thanks saucer. Think I'm just trying to confirm that I have got my calculations right and that I am doing the right thing? Common sense to me says that the longer you defer your pension, the more you are going to get, however from what research I have done, this is not the case. By my calculations, if I leave at 60, I will get a shed load of cash. If I leave at most other ages I will need to live to 100 to get the same amount.
Has anyone been through the process that can confirm this?

Normal retirement age in the final scheme was (is) 65. What meeting the 85 year rule meant (and means) was being able to retire earlier without an actuarial reduction. So in your case, if you left it to your CARE scheme normal pension age of SPA, you would only receive an actuarial increase on your pre-08 pension from age 65 to retirement, not age 60 to retirement.

Thank you and apologies if I confused matters.  I stand corrected on the normal retirement age.  My intention was to highlight the relevance and importance of R85 on reaching 60

Pipkin1812

Gimmeaminute I am in a very similar position and following your thread as very interested in any answers. Is the Civica website specific to you pension fund?  I’m not sure I understand it all but if you can afford to live on the pension income you’d receive at 60 then isn’t that what matters?  

Wentthedaywell?

Gimmeaminute said:

Thanks saucer. Think I'm just trying to confirm that I have got my calculations right and that I am doing the right thing? Common sense to me says that the longer you defer your pension, the more you are going to get, however from what research I have done, this is not the case. By my calculations, if I leave at 60, I will get a shed load of cash. If I leave at most other ages I will need to live to 100 to get the same amount.
Has anyone been through the process that can confirm this?

I flexibly retired a couple years back and was incredulous that if I didn't take my pension at 60 I would have to live to well over 200 to make it worthwhile deferring. I can't remember the calculation, but my pensions admin confirmed this. I did have R85 and high tapered protection though.

Obviously it was a total no-brainer to take it at 60 and it's all worked out very well. Like you, Gimme, I assumed taking it early was financially punished, or deferring rewarded, but it doesn't seem to be the case and it's a direct reduction for getting the pension for a few more years. 

Grab it while you can and enjoy active retirement!