Transferring out from LGPS

Alice_Holt

Assuming £18k is correct, have you compared the DB annual pension(s) with the current annuity return from an £18k pot?

As a very, very rough guide an annuity @ 3% escalation + 50% Joint Life would give c.£540 pa.

If market conditions were favourable over 38 years and that £18k value increased 190% (in real times) then you'd be looking at, say, c.£1k pa. (At today's value).

How do those figures compare with the guaranteed DB numbers?   (At today's value).

kinger101

I think CETV rates need to be considered in context of how far you are from retirement age, and whether another DB pension has better CETVs is a moot point as you aren't in that scheme.  What you have to figure out is whether surrendering an indexed-linked pension of x (with other potential benefits for spouse/partner) is worth y now.  

It's unlikely the present surrender value is competitive but you've got 35 years of capital growth (or otherwise) until the age you'd be drawing from the DB pensions.  One can pluck a hypothetical figure of say 2.5 % growth above inflation for the purposes of calculation knowing it will be wrong because returns are not predictable.  

On balance;

(a) potentially more upside if it goes well, and providing you have the appetite and capacity for the risk
(b) downside is that it could all go pear-shaped, and you're surrendering stable baseline income. 

I have a modest DB scheme which on top of the state pension I hope to have, should at least provide me with the basics if something goes disastrously wrong with my DC pot. This does help me sleep a little easier, which I'd class as quite an important benefit of a DB scheme.  

Reg_Smeeton

Why not leave the LGPS where it is, and it can act as part of the fixed income portion of your wider pension portfolio? That way you have the benefit of some inflation protection (without the potential downside of holding index linked gilts). Doesn’t seem worth the messing about for the sake of 18k to be honest

daveyjp

Reg_Smeeton said:

Why not leave the LGPS where it is, and it can act as part of the fixed income portion of your wider pension portfolio? That way you have the benefit of some inflation protection (without the potential downside of holding index linked gilts). Doesn’t seem worth the messing about for the sake of 18k to be honest

My thoughts too.  A diverse mix of pension provision isn't a bad thing.

With so many years left to work there is also a possibility of a return to a public pension role in later years and having previous years 'in the bank' could be beneficial.

NannaH

I’m in a similar position with my LGPS pension,  although I’m 55 and haven’t yet asked for a cetv amount.
 I can’t imagine it will be much as my statement says a pension of under £700 p.a. (It’s actually 2 seperate lgps schemes) . 

For me, anything under £100 a month income isn’t worth ‘ringfencing’  and the tiny amount that would go to my husband isn’t even worth considering. 

If I could take that income now then it might be worth keeping but it’s for age 67 so I’d probably lose a massive chunk even by taking it at 60. 

[Deleted User]

kinger101 said:

I think CETV rates need to be considered in context of how far you are from retirement age, and whether another DB pension has better CETVs is a moot point as you aren't in that scheme.  What you have to figure out is whether surrendering an indexed-linked pension of x (with other potential benefits for spouse/partner) is worth y now.  

It's unlikely the present surrender value is competitive but you've got 35 years of capital growth (or otherwise) until the age you'd be drawing from the DB pensions.  One can pluck a hypothetical figure of say 2.5 % growth above inflation for the purposes of calculation knowing it will be wrong because returns are not predictable.  

On balance;

(a) potentially more upside if it goes well, and providing you have the appetite and capacity for the risk
(b) downside is that it could all go pear-shaped, and you're surrendering stable baseline income. 

I have a modest DB scheme which on top of the state pension I hope to have, should at least provide me with the basics if something goes disastrously wrong with my DC pot. This does help me sleep a little easier, which I'd class as quite an important benefit of a DB scheme.  

Thanks for all the advice. As there is no significant benefit in my option, I have gone ahead with the transfer. I understand I am signing away a confirmed yearly income with my LGPS, but I do not see this as being much use at it's value. It would not make any difference if I was in hardship. I think it is much better to throw the 18 into stocks and see where they are in 30/40 years. It is a risk but an acceptable risk. If the value was higher, or I was closer to retirement, say 10 or 20 years, I might leave it there, but in total they are really around five years of service from my mid 20s or so, so I am prepared to take the gamble. I have signed the forms. 

In regards to family, I have life insurance, and my private pension and job would provide payouts in the event of my death. Not to mention the savings I have. They would be ok for a good while.  I don't have any kids anyway, maybe one day!

[Deleted User]

NannaH said:

I’m in a similar position with my LGPS pension,  although I’m 55 and haven’t yet asked for a cetv amount.
 I can’t imagine it will be much as my statement says a pension of under £700 p.a. (It’s actually 2 seperate lgps schemes) . 

For me, anything under £100 a month income isn’t worth ‘ringfencing’  and the tiny amount that would go to my husband isn’t even worth considering. 

If I could take that income now then it might be worth keeping but it’s for age 67 so I’d probably lose a massive chunk even by taking it at 60. 

If I was 55 id'd leave it there as it may not make much in a private pension I am assuming. I believe 5/10 years before I retire my private pension will move into safer stocks hence less chance of gains or losses, by the time you get it going it might not be worth it. I am sure others can advise properly. 

Silvertabby

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. 

Were you part time?  If not, and VERY roughly based on your info:

£19K / 60 = £316.67 X 4 (years) = £1,266.66

£22K /49 = £448.98 X 1.5 (years) = £673.47

Total pension given up = £1,940.13 - but it will be more than this once cost of living increases are added on.  Plus Spouses benefits, plus fully index linked, plus 10 year guarantee period.

A very poor exchange for just £18K.