LGPS for casual low-paid employment

Username03725

Started a casual p/t / intermittent job with the local authority late last year, more as a hobby than a need to work (I retired from my FT job last year). Just had my first payslip and was pleasantly surprised to see that for approx £450 earnings my £25 LGPS pension contribution has been topped up with another £100 employers contribution. £125, for almost no effort!!! 

I won't earn any more this tax year, then maybe £1000-£1500 over 3 or 4 paydays next (tax) year and that may well be it for me (I'll be 62 by then), so I'll end up with an LGPS pension worth approx £500 in 18 months time.

My intention before seeing today's payslip was to opt out of the LGPS but with that level of ERS contribution that seems not to be a good plan. I can't see details for such low numbers - can anyone point me to a guide that outlines benefits for low value LGPS pensions, or perhaps has personal experience of what a tiny LGPS is actually worth if left to mature to age 67?

OldBeanz

If you leave your job before retirement and you do not meet the 2 year vesting period you will have three options:

• you will normally be able to claim a refund of your contributions, less a deduction for tax and the cost, if any, of buying you back into the State Second Pension (S2P) in respect of your membership up to 5 April 2016 when the LGPS was contracted out of the State Second Pension (S2P). Interest is paid if the refund is not made within one year of leaving but no refund can be made if you rejoin the scheme in England or Wales within a month and a day of leaving or rejoin before the refund has been paid. Also, a refund will not be payable if, when you leave, you are paying into the LGPS in more than one job and you continue to be a member of the LGPS in the job that is continuing, or
• you may be able to transfer your benefits to a new pension arrangement (providing you have been a member of the LGPS for at least 3 months) - see the section on transferring out for more information about this option, or 
• you can delay your decision until you either, re-join the LGPS, transfer your benefits to a new pension arrangement, or want to take a refund of contributions. Where you delay your decision you will have a deferred refund pension account. Please note, you can only hold a deferred refund account for a maximum of 5 years or until age 75, whichever is earlier. If you have not transferred your benefits to a new pension arrangement or rejoined the LGPS by that time a refund of contributions will automatically be payable to you.

MX5huggy

£450 of earnings will give you £9.18 (1/49th) of index linked pension each year from 67. Well worth the £25 it’s cost you but maybe not going to make a material difference to your standard of living. Note you will need 2 years service for your membership to qualify if you leave before that you can either get a refund of your contributions or transfer the benefits to another scheme, in some circumstances.

Also investigate transferring in some or all of other pensions. This removes the 2 year vesting period and is often good value. 

Dazed_and_C0nfused

My intention before seeing today's payslip was to opt out of the LGPS but with that level of ERS contribution that seems not to be a good plan.

It wouldn't be a good plan as you would be giving up a valuable benefit of your employment and potentially be paying more income tax for the privilege.

But I'm not sure you understand the LGPS.  The amount of your contributions and the employer contributions aren't really relevant, you aren't building up a pot of money but a guaranteed, inflation proofed pension.

Username03725

Dazed_and_C0nfused said:

But I'm not sure you understand the LGPS.  The amount of your contributions and the employer contributions aren't really relevant, you aren't building up a pot of money but a guaranteed, inflation proofed pension.

I was aware of that difference but felt that there would be other options for short term membership, with or without the low value component; that was born out by the first response. The first two replies contained all the info I was after so thanks to both for providing the detail.