Transferring out from LGPS

[Deleted User]

I have two small LGPS pensions with the same council. I want to transfer these out to a private pension. One pension is final salary, the other is career average revalued earnings. The value of both pensions combined is less than £30,000. I was in the first pension for about four years, I was in the second pension for about a year and a half. My final salary on leaving the first one was about 19k per year, my salary on leaving the second one was 22k.

I am aware of the total value, I just wondered are there any final salary benefits I could be losing if I transfer out? I am 30. I want to have the money to put into my new company pension which is basically an investment pension. The money you put in is invested in shares of different things. I am not bothered about the risk as the value is low, however I am just worried there is some great benefit I could lose once I transfer out compared to a private pension. I always hear about how final salary pensions are so good!! If anyone can offer advice, thank you.

jimi_man

Well yes, you'd lose a guaranteed DB pension for the vagaries of the stock market. However that's the not the biggest issue, which is that transfers values (CETVs) out of the LGPS are usually pathetically low and certainly not in the order of magnitude that some people post about on here. Usually around 20 x I think.

There is someone who used to work in LGPS who'll no doubt provide more info, but personally I'd leave them where they are.

MX5huggy

Have you asked them for a transfer out value? Because the value on the annual statement is not that but what you will get every year from the set retirement dates. That is what you would lose, inflation proof guaranteed income for the rest of your life vs having a few quid in a stock market gamble. (I think I might of revealed my opinion on this plan). 

Silvertabby

Based on the figures/ service you have given, I would expect your total CETV to be over £30K, so you would have to go down the rabbit hole of obtaining financial advice/approval.

And, yes, the the CETV in relation to the amount of fully index linked pension is very poor.

[Deleted User]

Yes and it is below 30k. I think it is worth about 18k. I have had it confirmed and I do not need advice. 

[Deleted User]

MX5huggy said:

Have you asked them for a transfer out value? Because the value on the annual statement is not that but what you will get every year from the set retirement dates. That is what you would lose, inflation proof guaranteed income for the rest of your life vs having a few quid in a stock market gamble. (I think I might of revealed my opinion on this plan). 

As above,

I understand it is inflation proof, but this would only be a small amount per year, hence I do not see any issue in losing it. Inflation or not. It would still be a small amount.

dunstonh

[Deleted User] said:

Yes and it is below 30k. I think it is worth about 18k. I have had it confirmed and I do not need advice. 

That may not be correct.
Whilst the ceding scheme does not require you to seek advice if the CETV is below £30k, the receiving scheme may require an adviser to confirm you have given advice.  Most also require that advice to say it is suitable to transfer.

Have you checked your receiving scheme will allow you to transfer in without advice?

sevenhills

[Deleted User] said:

I understand it is inflation proof, but this would only be a small amount per year, hence I do not see any issue in losing it. Inflation or not. It would still be a small amount.

I don't share your view, large or small amount, you will be losing a good pension for yourself, your partner and children.

[Deleted User]

dunstonh said:

[Deleted User] said:

Yes and it is below 30k. I think it is worth about 18k. I have had it confirmed and I do not need advice. 

That may not be correct.
Whilst the ceding scheme does not require you to seek advice if the CETV is below £30k, the receiving scheme may require an adviser to confirm you have given advice.  Most also require that advice to say it is suitable to transfer.

Have you checked your receiving scheme will allow you to transfer in without advice?

Both sides have advised I do not need an adviser, the paperwork is ready to sign.

[Deleted User]

sevenhills said:

Deleted_User said:

I understand it is inflation proof, but this would only be a small amount per year, hence I do not see any issue in losing it. Inflation or not. It would still be a small amount.

I don't share your view, large or small amount, you will be losing a good pension for yourself, your partner and children.

That's fine, I understand. But as I will not retire likely for another 30 (possibly 40) years at least, I am drawn to invest and lose the small amount that the LGPS pension would pay me. All that I was worried about, were any major benefits the final salary pension would offer compared to the private pension. 

Pablo7474

Well the major benefits are that the LGPS would pay you a guaranteed income for life that probably increases with inflation and pays out to a spouse should you die before them. What other major benefits did you have in mind?

By transferring out you are giving this up and will have a pension pot that may not do much, it may go up or it may go down. Why take the risk? It seems a strange decision at your current age and one you maybe should take more time to consider. 

If you aren’t worried about losing the money then I don’t understand what major benefits you are concerned about.