Local Government Pension Scheme? Very confused!

Dazed_and_C0nfused

Jon_01 said:

Dazed_and_C0nfused said:

Jon_01 said:

Dazed_and_C0nfused said:

Jon_01 said:

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?

With LGPS she doesn't have a pension fund.

Do you understand the basics of how the LGPS works?

Ok, so the more I get into this, the more I get the feeling that she spoke to the trainee on the day she called the LPGS!

1: She was told the value of each fund, she wrote each down. But you say that that doesn't exist.

2: She asked if she could transfer in her other pension pots and was told, 'yes you can'. Clearly, if the value of the fund (however you look at it) isn't connected to the pension, then there's no point moving more funds into it?

3: She asked if she could transfer the funds out (transfer value) and was given the same numbers as 1

Do we understand the basics of the LGPS, well, we thought to had a vague idea after speaking to the guys at the fund, but having read the replies here, it's obvious we don't have a clue because the info we were given is (very) incorrect!

The things you've said in your latest post are making me question if she actually has a normal LGPS pension or if, for some odd reason, she opted out of the LGPS scheme (😳) and went for some DC alternative?

I know the civil service pension has that option (Partnership instead of Alpha) as people have asked about it on here before but I don't recollect such an option being mentioned with LGPS.  And for most people it's unlikely to be a sensible thing to do.

You can transfer into LGPS, in the first year of membership I think, but that is to buy more guaranteed pension, not to add to a pension fund/pot.

You refer to the value of each fund.  Can you remember what these funds are 🤔.

Just logged in to check!  Yes, it is a LGPS.

As to what the funds are?   The dashboard doesn't say, it just says 'Deferred Pension' for both.

The values for each fund as given by the guy at the fund were 43,400 and 38,500

She worked for the local authority twice, some years apart, and in different roles, which why we assumed she has two items showing? One in 2006 and the second in 2010.

It says that because there are no funds as it's a DB pension.

Maybe an easier way for you to understand it is to simply think of it as some of her salary is going to be paid later.  Every year from the schemes normal pension age (probably 60 or 65 for deferred pension from that period) for the rest of her life.

The amount of pension will be in increased each year to protect from inflation.  This happens both whilst deferred and also when in payment.

You can see the figures for recent years here.
https://www.lgpsmember.org/faqs/how-are-pension-increases-calculated/

There is no "fund" to worry about, no investment decisions to make.

In 99.9% of cases you/she can completely ignore the nominal "fund" value.  Might be useful if you get divorced but other than that I really don't think it will be of any relevance.

Do you now have the pension amounts at deferment and current entitlement?  

Jon_01

r6mile said:

What are the deferred pension amounts for each? (Or are they combined)

One is Deferred Pension £1,843.71   Lump sum £5,531.12

Two is                              £2,093.00                     £1,477.00

There's a slider for increasing the lump sum, but there seems no way of taking it to zero and increasing the monthly?

Dazed_and_C0nfused

Jon_01 said:

r6mile said:

What are the deferred pension amounts for each? (Or are they combined)

One is Deferred Pension £1,843.71   Lump sum £5,531.12

Two is                              £2,093.00                     £1,477.00

There's a slider for increasing the lump sum, but there seems no way of taking it to zero and increasing the monthly?

Are they the amounts at deferment or upto date values?  The formatting is awful, what do you actually mean for Two?

I presume you've realised giving up pension for extra lump sum is usually a very poor option financially?

In LGPS it appears giving up PCLS for extra pension (inverse commutation) is no longer an option for most people.

Regulation 58(1) of the LGPS Regulations provides an opportunity for members to convert a lump sum benefit into pension (“inverse commutation”).
This regulation has been revoked under Schedule 1 of the Local Government Pension Scheme (Transitional Provisions) Regulations 2008 (SI 2008/238).
However, we understand from MHCLG that there are a small number of members to whom this regulation still applies

Silvertabby

Jon_01 said:

r6mile said:

What are the deferred pension amounts for each? (Or are they combined)

One is Deferred Pension £1,843.71   Lump sum £5,531.12

Two is                              £2,093.00                     £1,477.00

There's a slider for increasing the lump sum, but there seems no way of taking it to zero and increasing the monthly?

No, she can't give up her lump sum in return for a bigger pension.  The LGPS used to offer that choice, but not in your wife's time.

Increasing the tax free lump sum would be at the commutation rate of 1:12 (ie, £12 of tax free cash for £1 of fully indexed linked pension) which is pretty poor value.

Producing a CETV is a complex calculation, involving many factors.  You certainly can't just ring up and get a figure over the phone, so I suspect that the lump sums you have been quoting could have been her LTA, which is sometimes used as a VERY notional initial valuation.  Did you perhaps ask if these pensions could be taken as one-off lump sums (trivial commutation) and were told no, because they were worth more than the maximum trivial commutation limit of £30K?  Or did you discuss transferring out, to be told that as the value of the benefits exceeded £30K you would have to take (and pay for) appropriate professional advice?

Jon_01

Dazed_and_C0nfused said:

Jon_01 said:

r6mile said:

What are the deferred pension amounts for each? (Or are they combined)

One is Deferred Pension £1,843.71   Lump sum £5,531.12

Two is                              £2,093.00                     £1,477.00

There's a slider for increasing the lump sum, but there seems no way of taking it to zero and increasing the monthly?

Are they the amounts at deferment or upto date values?  The formatting is awful, what do you actually mean for Two?

I presume you've realised giving up pension for extra lump sum is usually a very poor option financially?

In LGPS it appears giving up PCLS for extra pension (inverse commutation) is no longer an option for most people.

Regulation 58(1) of the LGPS Regulations provides an opportunity for members to convert a lump sum benefit into pension (“inverse commutation”). This regulation has been revoked under Schedule 1 of the Local Government Pension Scheme
(Transitional Provisions) Regulations 2008 (SI 2008/238). However, we understand
from
MHCLG that there are a small number of members to whom this regulation still applies

Yes, up to date as of Friday.

Apologies for the formatting, it looked ok when I cut n pasted and looks like that now!

One is Pension one, Two is the second pension. They each have their own ref and entry on the dashboard.

We realize that the lump sum is a bad idea, we were looking at reducing it to get a higher monthly, not increasing it. But there appears no way to get it lower than the values shown?

hyubh

Jon_01 said:

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.

What is it you are trying to understand...? I still think a basic problem here is that you are thinking in 'defined contribution' (DC) terms about a 'defined benefit' (DB) pension.

But from what has been said above, I get the impression that it can't...

She can still transfer out of the LGPS to a DC arrangement, unlike most other public sector pension schemes, since it is 'funded' (the government banned transfers out to DC arrangements for 'unfunded' public sector schemes at the same time as liberalising what you could do with DC pensions back in 2015). However why would she want to? 'Consolidation' with other, DC pensions as a reason isn't a good one, since a DB pension is a fundamentally different beast (especially a public sector one, which comes with uncapped indexation, unlike most private sector DB pensions).

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?

No, because it's a DB pension with a CETV of over 30K - for which the law says professional advice must be taken. And even then, finding a DC pension to transfer it to won't be easy.

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

In all honesty, that would be a waste of money. Just keep the LGPS pensions where the are, unless she were to rejoin either the LGPS or another public sector pension scheme.

Jon_01 said:

We realize that the lump sum is a bad idea, we were looking at reducing it to get a higher monthly, not increasing it. But there appears no way to get it lower than the values shown?

A lump sum isn't a bad idea, it's tax free cash! 'Commuting' pension into (extra) lump sum is though (other things being equal), since the 'commutation rate' is (intentionally) poor.

Dazed_and_C0nfused

I have no idea what two means though?

Is it a pension of £2,093 and lump sum less than that?

If so then overall she had a good base there, including a standard new State Pension £14.5k of guaranteed (and CPI protected) pension.

Silvertabby

Dazed_and_C0nfused said:

I have no idea what two means though?

Is it a pension of £2,093 and lump sum less than that?

If so then overall she had a good base there, including a standard new State Pension £14.5k of guaranteed (and CPI protected) pension.

Pre 2008 the LGPS had an accrual rate of 1/80th plus an automatic lump sum of 3 X annual pension.

Between 2008 and 2014 the accrual rate was 1/60th, with no automatic lump sum.  Pension 2 is a combination of pre and post 2008 rules, hence the automatic lump sum being less than the pension.

xylophone

Try reading


https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/defined-benefit-or-final-salary-pensions-schemes-explained

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/defined-contribution-pension-schemes

And my post here

https://forums.moneysavingexpert.com/discussion/comment/80332040/#Comment_80332040

Lemon_dr1zzle

It’s quite simple. 

She has two deferred pensions. 

She doesn’t have a ‘pension pot’. However she may request a CETV, which she has done, and this will provide a cash value which would be the amount which would be transferred to another scheme. As the value is over £30k she would need to get advice.