Taking my LGPS at 55. What now?

hyubh

Cowster said:

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.

It's not 'free' though, since the OP will have paid income tax on the pension payments before passing the money into the children's LISAs....? If by 4K x1.2 x 5 = 25K you're assuming returns that match inflation in the next 5 years (not ridiculous given our current high inflation), then I'm not sure why that works out better than just leaving the LGPS pension deferred until 60 and giving them the money out of the standard tax free lump sum ('retirement grant') then.

Cowster

It's not 'free' though, since the OP will have paid income tax on the pension payments before passing the money into the children's LISAs....? If by 4K x1.2 x 5 = 25K you're assuming returns that match inflation in the next 5 years (not ridiculous given our current high inflation), then I'm not sure why that works out better than just leaving the LGPS pension deferred until 60 and giving them the money out of the standard tax free lump sum ('retirement grant') then.

For simplicity I had not included inflation or growth.   In 5 years the OP could have £50,000 in a LISA between 2 children that he would he not have by taking the pension later.    There would also be an additional £10,000 over 5 years that has not been used after paying £4000 x 2 for each child.

I would be calculating how many years it would take to recoup that £60,000 by delaying taking the pension and if taking it earlier suited my circumstances better, particularly if I had other pensions kicking in later.

The OP will receive 3 x pension as a lump sum for any benefits built up before 2008 so from the information provided it would be less than £30,000 so less money for any house deposits.  

My main point is that I would not just directly compare the reduced pension v waiting until 60 but consider what the money could be used for by taking it early.

Gimmeaminute

Thanks for all the comments, very helpful.

To answer a couple of the questions, I use the pension calculator on the online portal provided by the council paying the pension and they have assured me that the numbers are accurate.

My plan is that I will be paying tax for the rest of my life, so whether I take the pension now or later, I will always be paying basic rate tax on it as the rest of my income will always be above the tax threshold.

I hadn't actually thought about LISAs for my kids and it is such a fantastic idea that that is what I am going to go with. The thought of being able to invest £20k over 5 years and then give them each £25k+ makes me feel all warm and fuzzy inside, so thank you Cowster for the fab suggestion.

sevenhills

Gimmeaminute said:

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?

Have you put into your calculations that if you draw funds from 55 and save it in an ISA you will lose around 5% of it's value every year. But if you don't draw funds it will increase by CPI inflation?

Yankee24

Gimmeaminute, people aren’t really answering you!   I did what you are proposing with a final salary scheme, and came to similar numbers.  I divided the money between the 2 kids.   They were both thru uni, but I paid off all of their student loans.  I did lisas for them For house deposits.  I also built up my cash to maximise my premium bonds…. This is my cash buffer to ride out bad years of drawdown once retired and also as 2 wedding pots.  I kept doing this till I felt the kids had had enough preinheritance.  When I retire I know the money left is all mine.  

Dansmam

I do like the LISA suggestion. You'll have the extra lgps income - if not already contributing max  you could look at increasing your NHS pension contributions, or for more flexibility/earlier access you might want to open a SIPP -  as long as you're in DB schemes you won't need to worry about MPAA when/if you want to access more than the TFLS.  

hyubh

I'd like someone from the 'draw the pension early and stick it in an ISA for 5 years' crowd to explain how confident they are that this would beat the 'return' on keeping the pension deferred until 60 to avoid an actuarial reduction on pre-08 pension completely (and have a smaller reduction on the post-08 tranches). Happy to keep the assumption that the desired capital in 5 years time is twice the pre-08 retirement grant, so that the 'keep the pension deferred' option would involve commutation at 12/1 to make up the difference.

For example, what are your inflation assumptions? In a few days time the OP's pension will be increasing by 10.1%. If I got anywhere near that in my own ISA this year, I'd be over the moon.