LGPS Deferred Pension

AlanP_2

Silvertabby said:

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).

Would you mind clarifying anyway please as I would be interested in understanding the implications?

Silvertabby

AlanP_2 said:

Silvertabby said:

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).

Would you mind clarifying anyway please as I would be interested in understanding the implications?

No probs.

When a pension (including any automatic lump sum)  is deferred, it increases each year in line with CPI inflation, which is applied in April.  If taken before then - even 31 March - then the pension in payment will increase in line with CPI, but the lump sum (which has already been paid in full) won't.

Using deferred (for more than 1 year) pension figures of £10K lump sum and £20K

annual pension:

Draw benefits from 1 March 2022

Lump sum £10K, annual pension £20K.  Annual pension increases to £20,620 from 1 April

Draw benefits from April 2022

Lump sum £10K plus 3.1% = £10,310.  Annual pension = £20,620

In this example, the gain of £310 has to be compared with the 'loss' of one month's pension.  But the difference will be greater the bigger the lump sum, either automatic or commuted.

In OP's case, he/she has a lot of pre 2008 service, and so is likely to have a decent automatic lump sum.  Also still assuming that the pension is actually deferred, which may not be the case.

Lemon_dr1zzle

I don’t deal with them in my section of work but wouldn’t a deferred lump sum get supp PI? 

Silvertabby

Lemon_dr1zzle said:

I don’t deal with them in my section of work but wouldn’t a deferred lump sum get supp PI? 

As long as the lump sum remains deferred, yes.  But if it's paid out in, say, March, it won't get the April increase.

Rich2808

Its an interesting debate about taking a lump sum vs keeping the higher annual pension.

Clearly depends on your personal circumstances.

If you are a single bloke and a bit unhealthy - it might make sense to take a lump sum as you don't know how long you might be around for. Might as well enjoy your 60s travelling/having fun with the cash - you won't be able to do that in your 80s.

If however you are married and your wife is much younger than you then the issue is different - given the survivor pension she would get.

All of course complicated by the ever changing LGPS and wider pension rules.

Itchytooth

Silvertabby said:

AlanP_2 said:

Silvertabby said:

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).

Would you mind clarifying anyway please as I would be interested in understanding the implications?

No probs.

When a pension (including any automatic lump sum)  is deferred, it increases each year in line with CPI inflation, which is applied in April.  If taken before then - even 31 March - then the pension in payment will increase in line with CPI, but the lump sum (which has already been paid in full) won't.

Using deferred (for more than 1 year) pension figures of £10K lump sum and £20K

annual pension:

Draw benefits from 1 March 2022

Lump sum £10K, annual pension £20K.  Annual pension increases to £20,620 from 1 April

Draw benefits from April 2022

Lump sum £10K plus 3.1% = £10,310.  Annual pension = £20,620

In this example, the gain of £310 has to be compared with the 'loss' of one month's pension.  But the difference will be greater the bigger the lump sum, either automatic or commuted.

In OP's case, he/she has a lot of pre 2008 service, and so is likely to have a decent automatic lump sum.  Also still assuming that the pension is actually deferred, which may not be the case.

Thank you, l never thought of that. So if l retire 3rd April 2023 instead of 31/03/23 with a lump sum approx. £48000 plus 3.1%=£49488 . A gain of £1488 for working 3 days longer.                                                                                                             My pension after reductions for leaving  early in April 2023 should be approx. £27500 and l do not have any intention to continue working after that date(l hope?).

Silvertabby

Itchytooth said:

Silvertabby said:

AlanP_2 said:

Silvertabby said:

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).

Would you mind clarifying anyway please as I would be interested in understanding the implications?

No probs.

When a pension (including any automatic lump sum)  is deferred, it increases each year in line with CPI inflation, which is applied in April.  If taken before then - even 31 March - then the pension in payment will increase in line with CPI, but the lump sum (which has already been paid in full) won't.

Using deferred (for more than 1 year) pension figures of £10K lump sum and £20K

annual pension:

Draw benefits from 1 March 2022

Lump sum £10K, annual pension £20K.  Annual pension increases to £20,620 from 1 April

Draw benefits from April 2022

Lump sum £10K plus 3.1% = £10,310.  Annual pension = £20,620

In this example, the gain of £310 has to be compared with the 'loss' of one month's pension.  But the difference will be greater the bigger the lump sum, either automatic or commuted.

In OP's case, he/she has a lot of pre 2008 service, and so is likely to have a decent automatic lump sum.  Also still assuming that the pension is actually deferred, which may not be the case.

Thank you, l never thought of that. So if l retire 3rd April 2023 instead of 31/03/23 with a lump sum approx. £48000 plus 3.1%=£49488 . A gain of £1488 for working 3 days longer.                                                                                                             My pension after reductions for leaving  early in April 2023 should be approx. £27500 and l do not have any intention to continue working after that date(l hope?).

It's still not clear if your pension is deferred (as per your post title) or if you are still working snd paying in to the LGPS.  If it's the latter, then this uplift won't apply.

However, if it's the former, then your CARE element will get the treasury uplift as at 1 April (if you work beyond that).

Itchytooth

Silvertabby said:

Itchytooth said:

Silvertabby said:

AlanP_2 said:

Silvertabby said:

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).

Would you mind clarifying anyway please as I would be interested in understanding the implications?

No probs.

When a pension (including any automatic lump sum)  is deferred, it increases each year in line with CPI inflation, which is applied in April.  If taken before then - even 31 March - then the pension in payment will increase in line with CPI, but the lump sum (which has already been paid in full) won't.

Using deferred (for more than 1 year) pension figures of £10K lump sum and £20K

annual pension:

Draw benefits from 1 March 2022

Lump sum £10K, annual pension £20K.  Annual pension increases to £20,620 from 1 April

Draw benefits from April 2022

Lump sum £10K plus 3.1% = £10,310.  Annual pension = £20,620

In this example, the gain of £310 has to be compared with the 'loss' of one month's pension.  But the difference will be greater the bigger the lump sum, either automatic or commuted.

In OP's case, he/she has a lot of pre 2008 service, and so is likely to have a decent automatic lump sum.  Also still assuming that the pension is actually deferred, which may not be the case.

Thank you, l never thought of that. So if l retire 3rd April 2023 instead of 31/03/23 with a lump sum approx. £48000 plus 3.1%=£49488 . A gain of £1488 for working 3 days longer.                                                                                                             My pension after reductions for leaving  early in April 2023 should be approx. £27500 and l do not have any intention to continue working after that date(l hope?).

It's still not clear if your pension is deferred (as per your post title) or if you are still working snd paying in to the LGPS.  If it's the latter, then this uplift won't apply.

However, if it's the former, then your CARE element will get the treasury uplift as at 1 April (if you work beyond that).

Sorry just realised on the deferred thread.  Apologies for confusion, I'm working up until 31st March or 3rd April 2023.  Many thanks for the advice.

jamjar92

@Itchytooth did you see the post by @OldBeanz regarding AVC's. If you are still working, you can save tax and possible ni (if your lgps does salary sacrifice) and take amount in 12 months part of the your tax free lump sum.