Local Government Pension Scheme? Very confused!

Jon_01

This might be a stupid question, but I've been looking for answers for a couple of days now, and I'm none the wiser!

I'm trying to help my wife work out what to do with a number of pensions she has.
She has 2 with the Local Government Pension Scheme for 2 different jobs over the years.
To work out the pension value, they give a formula something like X*Y/Z take way the number you first thought of... at no point is the actual value of the fund taken into account?
Using their maths, the pension value per month for both is around £200
The value of both funds is just over 80K

As far as I can see, the better option is to transfer out the 80K and all her other pots and buy an annuity, as the LGPS state that the full value of both funds is transferable.

Have I missed something?  She has tried talking to someone from the LGPS but has just been ten minutes of math speak she didn't understand...

Thanks.

jimi_man

Are you saying that her LGPS pension(s) amount to £2400 a year (£200 a month)?  It’s a defined benefit pension so the fund value is immaterial and has no bearing. The key numbers are the guaranteed pension per year. They are usually uncapped index linked and generally a pretty good deal. 

Transfers out of the LGPS are usually pretty dreadful value due to the CETV that they offer. 

Dazed_and_C0nfused

Have I missed something?

Yes.  LGPS isn't a pension in the way you seem to think it is.  For a start she doesn't have a pension "fund".

Her pension is an amount based on the scheme rules, usually calculated by reference to her salary and length of service.  With an element of inflation protection thrown in as well.

Is her service in the old final salary scheme or in the newer CARE scheme?

What information do you actually have?

hyubh

Jon_01 said:

I'm trying to help my wife work out what to do with a number of pensions she has.
She has 2 with the Local Government Pension Scheme for 2 different jobs over the years.
To work out the pension value, they give a formula something like X*Y/Z take way the number you first thought of... at no point is the actual value of the fund taken into account?
Using their maths, the pension value per month for both is around £200

Sounds like you're only familiar with DC pensions...? DB works very differently. Working out the pension accrual isn't actually that tricky, once you know the dates; under the current benefit structure, 1/49 of pay each year, increased by CPI each year thereafter, becomes a payment for life from state pension age. Contributions and 'fund value' are irrelevant, in fact there is no investment pot with your wife's name on it in the first place. Instead, there's a collective one backing the promised pension payments of all members of the scheme (well, all members of the applicable LGPS fund - roughly one for each old county area).

The value of both funds is just over 80K

Are these figures actually 'cash equivalent transfer values' (CETVs) - or perhaps the capital value for LTA (now PCLS [i.e. tax free cash] only) purposes...?

As far as I can see, the better option is to transfer out the 80K and all her other pots and buy an annuity, as the LGPS state that the full value of both funds is transferable.

I would be surprised if she could beat the LGPS pension by transferring out and buying an annuity. What sort of annuity are you looking at...? An equivalent to the LGPS pension would be joint life and fully indexed by CPI.

She has tried talking to someone from the LGPS but has just been ten minutes of math speak she didn't understand

I'm curious what question the LGPS administrator thought they were answering! E.g. if they thought they were answering how much cash could be commuted from the pension...

la531983

Surely transferring out of the LGPS under normal circumstances is the definition of insanity? 

Dazed_and_C0nfused

la531983 said:

Surely transferring out of the LGPS under normal circumstances is the definition of insanity? 

But only if you understanding what you are giving up.

The problem with most people who set off down this route is they have no idea what they are really doing.

Brie

Dazed_and_C0nfused said:

la531983 said:

Surely transferring out of the LGPS under normal circumstances is the definition of insanity? 

But only if you understanding what you are giving up.

The problem with most people who set off down this route is they have no idea what they are really doing.

And also unlikely to be allowed no matter how much money you throw at an IFA or whomever to try to get approval.

xylophone

LGPS is a defined benefit pension scheme. Your wife does not have a "fund"  but a "promise to pay" her benefits (which would be based on salary/length of service) at normal scheme retirement age (or earlier/later depending on the rules of the scheme).


Your wife has two deferred pensions with LGPS? 

Does the LA/other body for which she worked produce something like this?

https://lgps.buckinghamshire.gov.uk/if-youre-no-longer-paying-in-deferred/how-we-calculate-your-deferred-benefits/

Why would she wish to transfer out to buy an annuity when what she has is in effect a fully index linked annuity which  will almost certainly provide you with a widower's pension if she predeceases you?

https://www.lppapensions.co.uk/members/general-pensions-information/death-of-a-member/#:~:text=Widows / Civil Partners pension,not married at the time).

xylophone

Another thought, has your wife obtained a state pension forecast?

https://www.gov.uk/check-state-pension

Jon_01

xylophone said:

LGPS is a defined benefit pension scheme. Your wife does not have a "fund"  but a "promise to pay" her benefits (which would be based on salary/length of service) at normal scheme retirement age (or earlier/later depending on the rules of the scheme).


Your wife has two deferred pensions with LGPS? 

Does the LA/other body for which she worked produce something like this?

https://lgps.buckinghamshire.gov.uk/if-youre-no-longer-paying-in-deferred/how-we-calculate-your-deferred-benefits/

Why would she wish to transfer out to buy an annuity when what she has is in effect a fully index linked annuity which  will almost certainly provide you with a widower's pension if she predeceases you?

https://www.lppapensions.co.uk/members/general-pensions-information/death-of-a-member/#:~:text=Widows / Civil Partners pension,not married at the time).

Thank you for that.

The point of the post is, we don't know. We can't get any advice from the guys that work for the LGPS in a form that we understand! For example, when she asked if the total of the fund could be transferred out (ie the 80K), she was told yes it could. But from what has been said above, I get the impression that it can't...

I've just arranged my pension and thought this would be a simple matter! But from what I read above, coming out of the LGPS would be a huge mistake?

Would I be right in thinking she needs to consult someone that deals with LGPS's?

Jon_01

xylophone said:

Another thought, has your wife obtained a state pension forecast?

https://www.gov.uk/check-state-pension

Yes she has. I've just arranged my own by combining a number of pots into an annuity.  I thought this would be a similar situation as she also has a number of pots. But the LGPS is proving a hard nut to crack!