LGPS Deferred Pension

Itchytooth

Hi
I am 59 today and been in this scheme since 21 so now looking into leaving at 60. My question is, if l give up for every £1 from my annual pension and to receive  £12  lumpsum, max £60,000 is this worked out from the figures before reduction for leaving early (state retirement age 67)

Brie

I don't think the state retirement age is relevant.  It will be the normal retirement date of the scheme.  That might be 60 or 65.  It should be mentioned on your last pension statement that you received.

QrizB

Itchytooth said:

Hi
I am 59 today and been in this scheme since 21 so now looking into leaving at 60. My question is, if l give up for every £1 from my annual pension and to receive  £12  lumpsum, max £60,000 is this worked out from the figures before reduction for leaving early (state retirement age 67)

Normally, the actuarial reduction happens first and then you get to commute. Also 12:1 is a pretty poor rate, if you don't need the cash upfront you'll be better off taking a larger pension.

Silvertabby

In OP's case, with all that service, he/she will have R85 protections in respect of their pre 2008 service.  So, retirement ages (ie, when no early retirement reductions will be applied)  will be:

Up to 31 March 2008 = age 60

1 April 2008 to 31 March 2014 = age 65

1 April 2014 to date of leaving = SPA

The early payment reductions are applied before commutation.

Itchytooth

Thank you for the advice everyone, I thought that was the case about  early payment reductions, but was hoping l made a mistake.

Itchytooth

I was not going to reduce my pension for a larger lumpsum, The only reason l asked was because everyone l speak to at work  who have, or going to retire which is a very large number of old timers, decided to take a the larger lumpsum. So decided to double check with you guys that l was correct.
Twelve months to go and counting!

Silvertabby

Itchytooth said:

I was not going to reduce my pension for a larger lumpsum, The only reason l asked was because everyone l speak to at work  who have, or going to retire which is a very large number of old timers, decided to take a the larger lumpsum. So decided to double check with you guys that l was correct.
Twelve months to go and counting!

You'll get an automatic lump sum of 3 x your pre 2008 pension, so you'll have some tax free cash without having to commute.

As you may have read on these boards, the general feeling is that the public sector commutation rate of 1:12 is very poor value.  However, speaking as a retired LGPS administrator, approx 90% of retirees go for the maximum tax free lump sum.  Bird in the hand I suppose!

Itchytooth

Thanks for your reply. One last question. I will be 60 next January 24th, so as a 40% tax payer would l be right by saying, that l would be better retiring March 31/03/23. So that the first retirement pay would be April 30th 2023 and only pay 20% tax on the pension?

OldBeanz

Do you have an Avc? If so you can pay all your 40% tax in and draw it tax free with your pension.

Dansmam

Itchytooth said:

Thanks for your reply. One last question. I will be 60 next January 24th, so as a 40% tax payer would l be right by saying, that l would be better retiring March 31/03/23. So that the first retirement pay would be April 30th 2023 and only pay 20% tax on the pension?

If I've understood correctly (that's a big 'if' mind you, and hopefully the very knowledgeable Silvertabby will be along to confirm) you're best waiting to take your pension from the first Monday in the new tax year when the cpi uplift is applied to all your pension benefits including the lump sum. That's what I'm planning to do with my deferred pension.

Silvertabby

Dansmam said:

Itchytooth said:

Thanks for your reply. One last question. I will be 60 next January 24th, so as a 40% tax payer would l be right by saying, that l would be better retiring March 31/03/23. So that the first retirement pay would be April 30th 2023 and only pay 20% tax on the pension?

If I've understood correctly (that's a big 'if' mind you, and hopefully the very knowledgeable Silvertabby will be along to confirm) you're best waiting to take your pension from the first Monday in the new tax year when the cpi uplift is applied to all your pension benefits including the lump sum. That's what I'm planning to do with my deferred pension.

That would certainly be the case if the pension is deferred - but OP seems to be talking about his pension and leaving work in the same breath?

OP, can you clarify?  If your LGPS pension is indeed deferred (and you are working elsewhere) then I'll explain why not taking your LGPS pension until April would be beneficial (and not just for tax purposes).