Taking my LGPS at 55. What now?

Gimmeaminute

I am trying to max out what I get from my LGPS pension by the age of 80, on the premise that I might not live that long and if I do, I won't really care about money after that age. So far, I have figured out that I need to take my pension between the ages of 55 and 60 as if I wait any longer I will have to live a lot longer to get the same cash back.

I have a 30 year mostly final salary LGPS pension (1988 to 2018) and am currently 3 years into an NHS pension. I plan to carry on working for a while, potentially until I am 67 which will also give me a 15 year NHS pension and the SP will also kick in at approx £10k pa.

So, I have asked to start collecting my LGPS pension in June this year (at 55) which will give me an after tax additional income of £10k+pa which I don't really need, but will come in handy to put my kids through Uni and give them a great start in life.

So, my question is, what is the most efficient thing to do with my £10k pa for the next 12 years, given that I may have to dip into it occasionally?

Pat38493

Just checking but you realise that if you are still working, you will pay income tax on the pension at your marginal rate?

Also if your pension assets are mainly Defined Benefit pensions like LGPS and NHS, they won't "run out" at 80 - once you put them in payment they will carry on while you do.

Also you need to understand the reduction in pension that you are taking for taking it at 55 as opposed to a later date.

Gimmeaminute

I've worked out that after basic rate tax, at the age of 80 I will still be £60k ahead if I take the pension at the age of 55, rather than 67 given that the reduction in pension is better value as I can claim it for an additional 12 years.

I have pretty much worked out that I will always have to pay tax on the pension given that I still plan to work to 67 and will always have an income above the tax threshold.

I have no debts and a house worth approx £500k (mortgage paid off 10 years ago), so just looking at the best way to invest my pension from 55 to 67. Dunno if that will be pension related products or isas?

Silvertabby

You have R85 protections in respect of your pre 2008 service, so a good chunk of your LGPS benefits.

But R85 remains linked to a minimum retirement age of 60, so you will saying "thanks but no thanks" to a very valuable asset by taking your pension before 60.

Do you really need the money at 55 - or is it a case of 'I can take it so I'll have it'?

Gimmeaminute

I have run estimates on the pension website for every single age from 55 to 67. After taking off basic rate tax, leaving at 55 is the best option till about the age of 77, then taking it at 60 is the best option, but not by much by the age of 80. I would much rather have the income at my disposal given that the margins are so small.

Leaving it to 67 means that I would have much less time to collect the pension and I will never catch up till the age of 100, given that I have lost 12 years of getting anything at all. I don't think I will need the income after 80, so this is not really an option.

So, really just looking to find out the best way to invest £10k+ pa for the next 12 years? am I just as well putting it in isas every year or is there a pension wrapper/AVC that I can put the cash in?

Dazed_and_C0nfused

Why would you consider taking it at 67 if the normal pension age is 60?

Silvertabby

Dazed_and_C0nfused said:

Why would you consider taking it at 67 if the normal pension age is 60?

60 is OP's NRA on just his/her pre 2008 benefits.  Then NRA of 65 for benefits accrued from 2008 to 2014, and 67/SPA for benefits post 2014.

Dazed_and_C0nfused

Silvertabby said:

Dazed_and_C0nfused said:

Why would you consider taking it at 67 if the normal pension age is 60?

60 is OP's NRA on just his/her pre 2008 benefits.  Then NRA of 65 for benefits accrued from 2008 to 2014, and 67/SPA for benefits post 2014.

Ah, ok understood.

sheslookinhot

Is it not generally the case that over a long period, you basically get about the same amount.

Less over a longer period.
More over a shorter period.

Cowster

I think it depends on circumstance and what you intend to do with the money by taking it early, particularly if you do not really need it.

The OP might have 2 kids over 18 and choose to put £4000 each into a LISA. getting 2 X £1000 a year boost from the Government.    Do this for 5 years from 55-60 and both kids you would have £25,000 for a deposit with £5k of that being 'free' money.

Just an example but I think you have to calculate what you could do with the money by taking it early and not just a direct comparison to the actuarial reduction.

If you are still going to be comfortable with other pensions and SP then it might make sense to take it early.

Pat38493

Gimmeaminute said:

I have run estimates on the pension website for every single age from 55 to 67. After taking off basic rate tax, leaving at 55 is the best option till about the age of 77, then taking it at 60 is the best option, but not by much by the age of 80. I would much rather have the income at my disposal given that the margins are so small.

Leaving it to 67 means that I would have much less time to collect the pension and I will never catch up till the age of 100, given that I have lost 12 years of getting anything at all. I don't think I will need the income after 80, so this is not really an option.

So, really just looking to find out the best way to invest £10k+ pa for the next 12 years? am I just as well putting it in isas every year or is there a pension wrapper/AVC that I can put the cash in?

I am not familiar with the website you use but does it actually properly value what you are looking at, factoring in inflation increases and appropriate treatment of deferred benefits - I don’t know about LGPS but many of these type of pensions are more protected against inflation before you put them into payment.   

In other words if you are just multiplying the pension by the number of years, that may not give a true idea if the relative situation.