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Local Government Pension Scheme - transferring pensions in

w00519773
w00519773 Posts: 221 Forumite
Fourth Anniversary 100 Posts Name Dropper
Say I join LGPS with a new employer and I have two pensions elsewhere:

1) A  previous LGPS pension in another area of the UK.
2) A Defined Contribution pension with another employer.

Say I transfer both these pensions into the new LGPS pension.  I assume the following will happen:

1) The previous LGPS pension will transfer as 'Additional Pension contributions'.
2) The Defined Contribution pension will transfer as 'Additional Voluntary Contributions'.

Have I understood this correctly?

Comments

  • Silvertabby
    Silvertabby Posts: 9,739 Forumite
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    edited 17 February 2022 pm28 9:23PM
    w00519773 said:
    Say I join LGPS with a new employer and I have two pensions elsewhere:

    1) A  previous LGPS pension in another area of the UK.
    2) A Defined Contribution pension with another employer.

    Say I transfer both these pensions into the new LGPS pension.  I assume the following will happen:

    1) The previous LGPS pension will transfer as 'Additional Pension contributions'.
    2) The Defined Contribution pension will transfer as 'Additional Voluntary Contributions'.

    Have I understood this correctly?

    Not at all. 
    How big is the gap between your 2 LGPS records?  If more than 5 years, and you go ahead with the transfer, then your old LGPS pension will be converted to CARE benefits on your new record.  You would lose any R85 protections and the final salary link.
    Less than 5 years, however, and the transfer in would keep the final salary link in respect of your pre 2014 benefits and R85 protections in respect of your pre 2008 service.  This means that if your new post is on a higher whole time equivalent salary than your old (with cost of living increases) then all of your pre 2014 service will be re-calculated using your new pensionable pay.  However, if your new salary is lower, then you will be asked if you want to keep your records separate. 
    A DC transfer in would be converted to CARE benefits.  Note that acceptance of a DC transfer in is at your new employer's discretion - some accept DC transfers, some don't on account of the extremely generous transfer in factors.
    APCs and AVCs are both something quite different.  Come back to us for more details if you do decide to re-join the LGPS.
  • I was hoping someone might be able to help me decide on a similar LGPS transfer-in or not scenario. 

    I joined the LGPS scheme Nov/2008 and left it Mar/2016 with pay on leaving being £48k whilst working for a Local Authority. I've been working in the private sector since then but recently joined a new Local Authority in Dec/2022 on a salary of £75k. 

    I've done some reading but still slightly confused and can't determine the difference between the two options (transfer in or not) would mean for me?

    Many thanks
  • hyubh
    hyubh Posts: 3,666 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    I was hoping someone might be able to help me decide on a similar LGPS transfer-in or not scenario. 

    I joined the LGPS scheme Nov/2008 and left it Mar/2016 with pay on leaving being £48k whilst working for a Local Authority. I've been working in the private sector since then but recently joined a new Local Authority in Dec/2022 on a salary of £75k. 

    I've done some reading but still slightly confused and can't determine the difference between the two options (transfer in or not) would mean for me?

    Many thanks
    That's a five year disqualifying break for like-for-like service and re-established final salary link for pre-April 2014 membership. So, if you transferred, you would exchange the deferred benefit (increasing by CPI) with a CARE pension credit (also increasing by CPI). I'm not up-to-date on the factors used, but I would expect this still to be worthwhile (i.e. the CARE pension credit will be higher than the deferred pension). This is notwithstanding the fact you'd lose the lower NPA for what is currently the 2008-2014 component of your deferred benefit (age 65 vs. SPA).
  • hyubh said:
    I was hoping someone might be able to help me decide on a similar LGPS transfer-in or not scenario. 

    I joined the LGPS scheme Nov/2008 and left it Mar/2016 with pay on leaving being £48k whilst working for a Local Authority. I've been working in the private sector since then but recently joined a new Local Authority in Dec/2022 on a salary of £75k. 

    I've done some reading but still slightly confused and can't determine the difference between the two options (transfer in or not) would mean for me?

    Many thanks
    That's a five year disqualifying break for like-for-like service and re-established final salary link for pre-April 2014 membership. So, if you transferred, you would exchange the deferred benefit (increasing by CPI) with a CARE pension credit (also increasing by CPI). I'm not up-to-date on the factors used, but I would expect this still to be worthwhile (i.e. the CARE pension credit will be higher than the deferred pension). This is notwithstanding the fact you'd lose the lower NPA for what is currently the 2008-2014 component of your deferred benefit (age 65 vs. SPA).
    Thanks for replying @hyubh

    From what you've described am I right to assume it would 'probably be better' if I did go ahead with transferring in?

  • dunstonh
    dunstonh Posts: 118,611 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    edited 14 August 2023 am31 8:55AM
    Do you plan to retire earlier than scheme age?  If so, having a separate defined contribution plan available to fund the gap can be beneficial.      So, knowing what would 'probably be better'  will depend on your objectives.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • hyubh
    hyubh Posts: 3,666 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    hyubh said:
    I was hoping someone might be able to help me decide on a similar LGPS transfer-in or not scenario. 

    I joined the LGPS scheme Nov/2008 and left it Mar/2016 with pay on leaving being £48k whilst working for a Local Authority. I've been working in the private sector since then but recently joined a new Local Authority in Dec/2022 on a salary of £75k. 

    I've done some reading but still slightly confused and can't determine the difference between the two options (transfer in or not) would mean for me?

    Many thanks
    That's a five year disqualifying break for like-for-like service and re-established final salary link for pre-April 2014 membership. So, if you transferred, you would exchange the deferred benefit (increasing by CPI) with a CARE pension credit (also increasing by CPI). I'm not up-to-date on the factors used, but I would expect this still to be worthwhile (i.e. the CARE pension credit will be higher than the deferred pension). This is notwithstanding the fact you'd lose the lower NPA for what is currently the 2008-2014 component of your deferred benefit (age 65 vs. SPA).
    Thanks for replying @hyubh

    From what you've described am I right to assume it would 'probably be better' if I did go ahead with transferring in?
    Probably, but get a quotation from the administrator first, if you haven't already.
  • dunstonh said:
    Do you plan to retire earlier than scheme age?  If so, having a separate defined contribution plan available to fund the gap can be beneficial.      So, knowing what would 'probably be better'  will depend on your objectives.
    Thanks for the reply @dunstoph

    Yes, I would hope to retire earlier than the scheme age although who knows, I'm 42 years old with 3 children 8 and under so some very expensive years lie ahead I suspect. I do have a small BTL property that I had in mind would cover the gap.
  • hyubh said:
    hyubh said:
    I was hoping someone might be able to help me decide on a similar LGPS transfer-in or not scenario. 

    I joined the LGPS scheme Nov/2008 and left it Mar/2016 with pay on leaving being £48k whilst working for a Local Authority. I've been working in the private sector since then but recently joined a new Local Authority in Dec/2022 on a salary of £75k. 

    I've done some reading but still slightly confused and can't determine the difference between the two options (transfer in or not) would mean for me?

    Many thanks
    That's a five year disqualifying break for like-for-like service and re-established final salary link for pre-April 2014 membership. So, if you transferred, you would exchange the deferred benefit (increasing by CPI) with a CARE pension credit (also increasing by CPI). I'm not up-to-date on the factors used, but I would expect this still to be worthwhile (i.e. the CARE pension credit will be higher than the deferred pension). This is notwithstanding the fact you'd lose the lower NPA for what is currently the 2008-2014 component of your deferred benefit (age 65 vs. SPA).
    Thanks for replying @hyubh

    From what you've described am I right to assume it would 'probably be better' if I did go ahead with transferring in?
    Probably, but get a quotation from the administrator first, if you haven't already.
    I recently received a quotation stating the following:

    Estimated Current Annual Pension: £543.00
    Estimated Annual Pension after Transfer In: £7,994.15

    When I look at the total pension value of my pension with the previous fund it is: £7,613.34

    Am I oversimplifying it to assume that by subtracting £543.00 from £7,994.16 and arriving at £7,451.15, that not transferring in is the better option?

  • Silvertabby
    Silvertabby Posts: 9,739 Forumite
    Eighth Anniversary 1,000 Posts Name Dropper Photogenic
    edited 13 November 2023 am30 11:28AM
    It's not quite as simple as that, as so many factors could come into play.

    If you don't combine, then you could take your earlier benefits while still working in your current post - but as you joined after 1 Oct 2006 you don't have any R85 protections, so taking this pension before age 65 would result in full actuarial reductions for early payment.  If you do combine, however, then all of your benefits would be reduced if taken before SPA (although the transfer factors used do take the different NRA dates into account).

    In your case, with those figures, I would suggest that the biggest factor to consider would be possible redundancy after age 55/57.  If you keep your records separate, then only your current post benefits would be paid without any early payment reductions, whereas if you had combined you would get the whole lot.

    Not quite so drastic a difference (money wise) with ill health retirement, just the faff of going through 2 lots of applications/occ health processes with 2 different employers.

    Crystal ball, anyone?
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