Lgps

Missymoo2

My partner has 2 pensions in lgps.
He is aged 56 and has a deferred pension ( 1985-2005) which he can take anytime but deductions if he takes it before aged 60.
Minimum lump sum is £24658 if he takes it at the end of this year and £7468 pa. The reductions are £2180 from his lump sum and £1483 pa taken from his annual pension for taking before aged 60.

His current pension (2008 - present) he pays in 8.5%. 

Would it be better to take the pension now and put the regular monthly payments into AVCs for his current pension (would most likey pay lump sum from mortgage) or leave it until age 60 to avoid early payment reductions.
He has not paid any AVCs previously so  unsure how they work and would they be beneficial, he will unlikely to work until full retirement age so probably another 4-5 years at reduced hours.

Many thanks

mark55man

HI @Missymoo2 - just giving this a little bump - I am not a LGPS expert so don't want to comment on that aspect.  It seems that your actuarial reduction (penalty for taking it early) is about 5% p.a.   This means your partner would have to live about 20 years past taking it before you became net worse off.  By the time you get to 60 you would normally expect to live this long extra

Only you know your need for more money now early in retirement rather than more money later, but in reality if all you are doing with the money you are taking early is putting it into an AVC then you are swapping future guaranteed income for the flexibility of a pot of money.  This is is generally regarded as a poor decision so I would go with your second choice - leave it to later and avoid the reduction, unless you have a need to take it (ie want to reduce working partially or completely

Generally this is seen as a bad thing if you don't really need the money now

Dazed_and_C0nfused

It seems that your actuarial reduction (penalty for taking it early) is about 5% p.a

It really isn't a penalty though, it's simply reflecting the fact that you are expecting the pension to be paid for a longer period.

mark55man

you are right.  getting less for longer is a calculation not a penalty - if you die early you are up so a kind of win, if you live longer you will be slightly poorer but are still alive to moan (which is a different kind of win) .  for some people the reduction is so slight as to be a no brainer to take it (although if you take it you may need to leave your current job which itself may be a win or a lose!!)

Missymoo2

Many thanks for that. Yes it seems leaving it until he decides to retire completely or maybe flexible retirement which might be an option.

Thanks again

Silvertabby

Before setting your hearts on flexible retirement, note that in the case of someone with R85 protections taking flexi before age 60 normally incurs substantial employer costs.

Sadly, this means that many pre 60 flexi requests have been rejected on cost grounds, apart from anything else.

Missymoo2

At the moment we are just weighing up the options due to the complication of having the 2 pensions. I have significant health issues which are getting worse unfortunately. He donated his kidney to me which has slowed him down too as his function did not quite recover 😞.
We were planning to down size and relocate but have support here so just sorting everything out as we still have a mortgage.

thanks again

OldBeanz

Have you looked at contributing to an AVC. An easy way to save tax and put some money in savings.