LGPS - combine old with new pots?

hazel_davey

Hi,

I'm hoping for some advice please on my LGPS pension.
Would I be better off combining my two LGPS pots or leaving them separate?

I have an old LGPS pot from 2003 - 2017; I was on £33,000 when I left.
I re-joined LGPS in July 2022 on £38,500.

As I'm within the 5 year gap, I've been given the option to combine the two.

I understand that my Final Salary element from 2003 - 2014 would benefit from me being on a higher wage, but...

I'm a little confused about CPI - the deferred pot is linked to that with a protection from going negative by the Pension Act 1971. Am I right in thinking my new LGPS pension post would be linked to CPI too, but without the protection from going negative?

I note combining the two pots would also negatively impact the Rule of 85 by the gap period of 5 years. I've no way of knowing if I'll be able to retire early (win the lottery?! ;-)) - is it worth worrying about?

Thank you!

hyubh

hazel_davey said:

I have an old LGPS pot from 2003 - 2017; I was on £33,000 when I left.
I re-joined LGPS in July 2022 on £38,500.

As I'm within the 5 year gap, I've been given the option to combine the two.

I understand that my Final Salary element from 2003 - 2014 would benefit from me being on a higher wage

Yes - I make the final salary of the deferred pension to be around £36500 by 2022. What ultimately matters though is whether your current salary maintains the gap, after inflation.

I'm a little confused about CPI - the deferred pot is linked to that with a protection from going negative by the Pension Act 1971. Am I right in thinking my new LGPS pension post would be linked to CPI too, but without the protection from going negative?

Pension increases when you leave cannot be negative, yes. So if you keep the old membership separate, then it will continue to attract CPI increases with a floor of zero. Revaluation of CARE pension while an active member, in contrast, will be negative if CPI is negative. However you might look back at how many years of deflation we have had in the UK over the past 40 years and think that's not much of a big deal. Also talk of active member revaluation will only be meaningful for CARE service.

I note combining the two pots would also negatively impact the Rule of 85 by the gap period of 5 years. I've no way of knowing if I'll be able to retire early (win the lottery?! ;-)) - is it worth worrying about?

It's only the 2003-2008 period that will be protected, so half (slightly less than half?) of the total final salary service that would benefit from a higher final salary if you did aggregate. Also whether 5 years might be material or not will depend on your age...

hazel_davey

Thank you, @hyubh!

'What ultimately matters though is whether your current salary maintains the gap, after inflation.'
- aye, there's the rub. The wage increases here are typically 3 - 5%, so if I add the 10% inflation for the past year to the deferred pot, it's just keeping pace unless I go for a promotion. Argh, this has been giving me a headache for a year...

LGPS are very keen for me to link and seem to think it would be a Good Thing for me, but being suspicious I wonder if it would save them money in the long run! 

For Rule of 85, I've just turned 50.