Previous DC pension transfer into SIPP/LGPS

Clownfish68

Recently took a job in local government  which involved a 10k drop in earnings.  Most of my team are nearing retirement in about 3 years so there’s potential I can be back on to an even keel by then which means my pension contributions will also increase by retirement compared to what they are now based on current wage. 

I’m 35 currently ideally I’d like to retire by 65 without touching LGPS pension so this post is more about how to go about funding a bridging pension more than anything. 

My existing pension pot is 21000. Now I have the option to transfer in (still waiting on HR to process but if anyone has a rough idea on what this could be potentially valued at that would be great although I presume this would be difficult to calculate even roughly depending on calculations used). If I did say 30 years In LGPS I’d have a pension of about 20+k. 

With my existing pension should I be looking to transfer into a SIPP. Can I gain some tax relief etc. given the small amount, years anticipated in LGPS and my current age is it worth me taking the gamble from a generally middle of fence return to high risk? 

Albermarle

With my existing pension should I be looking to transfer into a SIPP. Can I gain some tax relief etc. given the small amount, years anticipated in LGPS and my current age is it worth me taking the gamble from a generally middle of fence return to high risk? 

A SIPP is just another type of DC pension, so you may well be better staying with the pension you have . You will already have gained tax relief on the current pension, so you will not gain it again by transferring it !

If you do keep the DC pension, rather than transferring into LGPS, then a higher risk fund is probably more suitable due to your age . You have plenty of time to ride out short/medium term gyrations in the markets.

There is a similar sort of thread running at the moment.

Transferring DC pots to DB scheme — MoneySavingExpert Forum

Clownfish68

Thanks for that. Did find it odd as I was skimming through a couple of articles earlier and one suggest this as a benefit! 

hobo_baggins

I transferred a private sector DB into LGPS a few months ago. 

I asked a similar question regarding LGPS transfers when I was originally looking into this and was sent some helpful links.  I used this spreadsheet https://www.lgpslibrary.org/assets/actgui/ew/Factors_v9_20191220.xlsm to obtain an indicative value so it may be of use to you.

I used the tab x-213 for "Non-Club Transfer In - NPA 67 - Males".  Take your CETV and divide it by the factor "Gross Pension Of £1 Per Annum" for the row that matches your age to get your expected pension per annum.

I am not sure if these are the most up to date factors but it was close enough to what I was offered so should give you a good idea.

I found the LGPS extremely generous compared to the pension I was transferring and with the uncapped index linking even more so.  Of course if you are looking at transferring in a DC scheme you will have different considerations when deciding whether to transfer or not.

Clownfish68

Another question springs to mind. Am I better increasing my risk ratio now or wait to see if things drop off more then ‘buy in’ at a lower end if you catch my drift. 

Albermarle

Clownfish68 said:

Another question springs to mind. Am I better increasing my risk ratio now or wait to see if things drop off more then ‘buy in’ at a lower end if you catch my drift. 

Only someone who can see into the future can answer that question.
What about if you wait, and then it goes up rather than down?

In fact in July markets have picked up. Will this continue? nobody knows.

In reality if you are in it for the long term, probably will not make much difference if you do it now , or wait ( but not too long)

dunstonh

Another question springs to mind. Am I better increasing my risk ratio now or wait to see if things drop off more then ‘buy in’ at a lower end if you catch my drift. 

  The current recent market low point was around 20th June.  Since then most assets have increased in value.   So, you could be waiting forever for it to drop more.   Or it could be that it will go down again.  You don't know.

However, you are talking about 30 odd years.  A few per cent now averaged over 30 years is minuscule and not worth the effort whether you get the timing right or wrong.

QrizB

dunstonh said:

Another question springs to mind. Am I better increasing my risk ratio now or wait to see if things drop off more then ‘buy in’ at a lower end if you catch my drift. 

  The current recent market low point was around 20th June.

I'd noticed that my DC pension and my SSISA both seemed to be creeping up again. Glad to know I'm not imagining it!