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

Johnnyboy11

What happens to R85 protection if you meet the criteria and retire at say age 55. Is the protection lost altogether, or do you still get zero actuarial reduction from age 60-65?

Silvertabby

Johnnyboy11 said:

What happens to R85 protection if you meet the criteria and retire at say age 55. Is the protection lost altogether, or do you still get zero actuarial reduction from age 60-65?

R85 is still linked to a minimum retirement age of 60, so if you left at 55 your pre 2008 benefits would be reduced by the factor for being taken 5 years early.

2008 to 2014 would be reduced by 10 years, and post 2014 would be reduced by the number of years to SPA.

Pipkin1812

 Happy to start my own thread but have some very similar issues. Can someone explain why 60 is optimal. Does the pre 2008 (protected by R85) decrease in value if not taken at 60?

hyubh

Pipkin1812 said:

 Happy to start my own thread but have some very similar issues. Can someone explain why 60 is optimal. Does the pre 2008 (protected by R85) decrease in value if not taken at 60?

See my second post on p.1 - the pre-08 pension doesn't go down, you just don't get any special increase for drawing it after 60. Keep in mind the 60ths pension (i.e. pertaining to 2008-14 service, and possibly 2008-22 depending on McCloud) will still get an actuarial reduction if retiring before 65, likewise CARE pension will do so if retiring before your state pension age. So if the pre-08 component is small, you might prefer to wait to avoid taking a larger actuarial reduction on the other parts.

Also, for an active member, the final salary applicable remains in respect of finally leaving. So if you stayed on after 60 and your final pensionable pay in the 2008 scheme (12 month average) were to increase above inflation between 60 and leaving, then in effect you would be increasing the value of the pre-08 pension in real terms anyway.

Gimmeaminute

So, almost a year on, I have crunched the numbers over and over and have decided to take my pension at 55. I am basing this on the fact that either I will be deceased by the age of 80, or no longer need a large income when I get there.

The numbers make taking my pension at 55 or 60 very similar, but at 55 I will have a pension that I can get sooner, save in it's entirety every month and a get a lump sum (with a small reduction), both of which I can use to get my kids through Uni starting next year.

My question today is, is there anything at all that I can do to increase my pension at all, bearing in mind that the magic date is in June 23? I am aware of people buying additional years, but have no idea how that works or if it is even available to the LGPS.

Dazed_and_C0nfused

https://www.lgpsmember.org/your-pension/paying-in/paying-more/

Dazed_and_C0nfused

As you are under transitional rules it would also be prudent to check (in full) your State Pension forecast on gov.uk to see if you will need to make any voluntary NI contributions to reach the standard new State Pension amount.

Your full forecast will show the amount accrued to 5 April 2021 at the moment so you can probably add in another 3 years from your expected time still working.

Nebulous2

You can take quite a bit of AVC money tax-free in the LGPS scheme. Paying extra into an AVC will get you the tax relief and you can then take the money out tax-free at the point you draw your pension. 

jamjar92

Nebulous2 the pension is now deferred so AVC is not an option as it’s for active members only.

PaulbytheRidgeway

Like many others I'm lucky enough to be in the LGPS and have been a member since 2000. I'm 53 and have been running the numbers.  For these calcs I've ignored state pension, rule of 85 and other protections etc.  I've based figures below on a forecast all-in (DB and CARE) LGPS pension of £25k at 67 just to keep it simple and non-personal. I've also ignored reductions for lump sum.  Percentage reductions are based on July 23 changes available at the LGPS member 'taking your pension' webpage, so you can do these for age 55 or 56 if you like - you might want to use your latest LGPS pension statement to make it more specific. 

All I've done, hopefully without errors,  is work out the reduction from the age 67 pension and multiply this by number of years this will be paid until 80. This doesn't take account of state pension. I've also done this for age 90 (as if!) by adding another 10 years to each sum.  

• Age 67 – My standard pension age - no reduction Total to 80 (13 yrs) at £25k p.a. =  £325k  (to 90, £575k)
• Age 57 (10 years early) 35.6% loss Total to 80 (23 yrs) at £16.1k p.a. = £339k   (to 90, £531k)
• Age 60 (7 years early) 27.4% loss. Total to 80 (20 yrs) at £18.5k p.a. = £363k  (to 90, £555k)
• Age 62 (5 years early), 20.9% loss. Total to 80 (18yrs) at £19.5k p.a. = £355k  (to 90, £554k)
• Age 64 (3 years early), 13.5% loss. Total to 80 (16yrs) at £21.6k p.a. = £346k (to 90, £562k)

There appears to be a bit of a 'sweet' spot at 60 when total pension paid out to 80 is maximised - but note that this sweetness seems to turn sour up to 90 when you benefit from the higher annual pension....

I guess it's all down to personal health, lifestyle preferences, dependents, legacies and other finances......but I know where I am aiming for ;-)