Local government pension

Nebulous2

My employer couldn't afford to continue membership of the LGPS and took us out. 

I took almost a year to find another role that suited me, but took a £9k drop in salary to get back into the LGPS. 

I've now drawn my pension and am extremely glad I made the move. 

30% of salary seems about right to put a value on the pension. 

MX5huggy

You’ll probably be on a pay grade with automatic annual increases for 5 years plus whatever pay award is negotiated each year. It varies by employer but for example grade 7 at mine starts at £27852 after 5 years it’s £31099. 

Matt_22

So you would kind of say on a 32k wage. The lgps is possibly seen as worth another 9k on ones wage?

Dazed_and_C0nfused

Matt_22 said:

So you would kind of say on a 32k wage. The lgps is possibly seen as worth another 9k on ones wage?

No expert on comparisons like that but on £32k you would pay £2,080 in contributions (real cost likely to be£1,664 after tax relief) and you would accrue a pension of £653.  Which is increased annually to protect from inflation.

Payable from State Pension age for as long as you live 😀.

Matt_22

Thanks then there would be the employer contribution?

Dazed_and_C0nfused

Matt_22 said:

Thanks then there would be the employer contribution?

That is irrelevant for a DB pension, you get 1/49th of the pay relevant for pension purposes, usually your salary.

Universidad

Matt_22 said:

So you would kind of say on a 32k wage. The lgps is possibly seen as worth another 9k on ones wage?

As @Dazed_and_C0nfused pointed out, on a 32K salary you would acrue £653 of annual pension, which would be paid out each year you live in retirement.

(This will increase with inflation, so it's always going to be worth roughly what £653 is worth right now, even though you won't collect on it for years).

Because you don't know how long you will live, you don't know how much value you will actually get out of it. 

But if you retire at 68 and live to 84, then you will collect it for 16 years, which means that £653 pounds every year will be worth just shy of 10.5K over the course of your life. (Which actually is very close to 9K, when you discount your own contributions).

Of course you might live a lot longer, and do a lot better.

The real value, arguably, is knowing that you have that amount of financial security no matter how long you live. 

In that vein, another way of comparing the value is to ask what it would cost to buy an annuity that paid out £653 pounds and increased with inflation. That would, even with the recent increase in annuity rates, cost a lot more than £10,000. (And wouldn't account for the death-in-service benefits or spousal benefits). 

Long story short: It's super valuable.

Matt_22

Thanks that explains it perfectly 

Matt_22

And each additional year you work there it would just be amplified.

Dazed_and_C0nfused

Matt_22 said:

And each additional year you work there it would just be amplified.

In line with whatever your earnings were for pension purposes yes.

Plus the annual inflation increase.

A very good scheme.