Medical Retirement LGPS and State Pension.

ThinController

Hello,

At the age of 61, I have been offered medical retirement from my job as a civilian with the Police (so am in LGPS scheme) and have been since 1993. I will apparently receive an enhanced pension due to medical retirement. I have yet  to decide whether or not to take the enhanced lump sum and lower monthly pension or standard lump sum and higher monthly payments. 

It is actually the second time I will have been medically retired, as I was in the Armed Forces for 12 years but was quite badly injured in Gulf War 1 in 1991. So, I also receive a tax free attributable full Armed Forces 1975 pension scheme and tax free war disablement pension, so should have enough to live on, as have basically been banking both of these for many years whilst still working.   

According to the government website, my state pension starts in 2029. It states I should receive £203.85 per week. Underneath that it says:

£203.85 is the most you can get

You cannot improve your forecast any more.

If you’re working you may still need to pay National Insurance contributions……….

 

So, do I gather, even if taking the LGPS pension, I won’t have to make any further pension contributions to get the full state pension in 2029?

Will getting my state pension affect the LGPS pension and/or Armed Forces Pension/War Disablement Pension?

I did try to get some pensions advice about this from the Pension Wise service (linked from Gov.UK Pensions) but the chap really confused me talking about pension funds and pots and things, then said he couldn’t help me as he wasn’t qualified!

Apologies if this is pretty basic stuff to the experts here, but I don’t really know much about pensions.

Thanks.

GunJack

Your SP forecast shows you have contributed enough NI to get full NewSP, so that's now a given with no further NI contribution. The LGPS is your Occupational/Private/Personal pension, and is completely independant of SP, so yes you get both, paid according to the rules of each scheme. 

I can't answer about Armed Forces Pension/War Disablement Pension as I don't know the details, but hopefully @Silvertabby will  see this and respond - she's an ex-RAF and LGPS pension administrator so should be able to help on those elements  

xylophone

Pension Wise cannot help you with defined benefits pensions - LGPS and Armed Forces are both DB pensions.

With regard to your state pension, your forecast has stated that you have reached the maximum so that further contributions will not improve the pension.

You will be invited to claim shortly before you reach SPA and will receive the full NSP at the rate applicable in 2029.

With regard to your tax position, it would appear that the LGPS pension will be taxable (after any tax free lump sum you may receive) - how much tax you actually pay will depend on your individual position.

The state pension will be paid gross but counts as taxable income - HMRC will deal with how you pay tax .

By way of a very simple example, suppose  a person's only income pre SPA was a pension of £20,000 a year . His tax code was 1257L

He reached SPA and started to receive a state pension of approx £10,500 a year..

HMRC adjusted his tax code to  207L in order to take the tax due from the occupational pension.

https://www.gov.uk/tax-on-pension/how-your-tax-is-paid

Silvertabby

As GunJack says, in your case (everyone is different!) you have already accrued the full nSP, so no further NI contributions are required.

Because both your Armed Forces and LGPS pensions have GMPs ( service between 1978 and 1997) there may be a tiny adjustment once you reach SPA - but I do mean really small.  Typical reduction is little more than £2 per month. 

As for the maximum lump sum/ reduced pension conundrum, there will be many on these boards who will shout "don't do it!" because of the p. poor commutation rate of 1:12.  But that decision isn't quite so clear cut when someone is leaving on (Tier  1?) ill health grounds.  I do hope that your medical condition isn't life limiting, but if it is you may wish to factor in the LGPS 10 year pension guarantee, which applies in addition to any spouses/dependants pensions payable on your death.  ie, should you die within 10 years of starting to draw your pension, then your nominated beneficiary will receive a tax free lump sum of 10 X actual annual pension minus pension payments already made to you.  Note this only applies to your LGPS pension - you are well over the 5 year AFPS guarantee period

Hope this helps.

ThinController

@xylophone:

 

I am not entirely sure what DB pensions are, but will look it up. I just joined with the relevant works pensions scheme years ago. I thought I was doing the right thing.

 

Many thanks re the tax info and state pension.

 

@silvertabby:

Many thanks.

 

Again not overly sure what GMP is, but if only slightly affects me, I won't worry.

 

My condition is life limiting, but not imminently. I have a fair few years left hopefully.

 

Sadly, as my wife passed away some 15 years ago and we were not blessed with offspring, I do not have any beneficiaries to pass the pension benefits onto.

 

I am somewhat tempted to take the maximum tax free lump sum and basically spending the lot over the next few years.

 

Thans again.

 

Silvertabby

ThinController said:

@xylophone:

 

I am not entirely sure what DB pensions are, but will look it up. I just joined with the relevant works pensions scheme years ago. I thought I was doing the right thing.

 

Many thanks re the tax info and state pension.

 

@silvertabby:

Many thanks.

 

Again not overly sure what GMP is, but if only slightly affects me, I won't worry.

 

My condition is life limiting, but not imminently. I have a fair few years left hopefully.

 

Sadly, as my wife passed away some 15 years ago and we were not blessed with offspring, I do not have any beneficiaries to pass the pension benefits onto.

 

I am somewhat tempted to take the maximum tax free lump sum and basically spending the lot over the next few years.

 

Thans again.

 

DB means Defined Benefit pension scheme - ie, you are guaranteed to get a set amount of pension regardless of the ups and downs of the stock market.  DBs are the gold standard of pension schemes.  The alternative DC (Defined Contribution) pension schemes are not only reliant on the amount you (and your employer) pay in, but also the investment you choose.  You definitely did the right thing in opting to remain in both AFPS and LGPS.

The book of GMP is as long as War and Peace, but it really isn't anything for you to be concerned about - I only mentioned it because I didn't want to say that your AFPS and LGPS wouldn't be affected when you reach SPA.  

My sympathies on your circumstances.  Yes, taking the maximum tax free cash and enjoying yourself is certainly an option!

Regards.

xylophone

You certainly made the right move in joining your occupational defined benefit pension schemes.

Such pensions are unmatched in the level of  guaranteed individual (and where applicable spouse/child) provision made by the schemes.

As you have only your own needs to consider (and seem to have  more than adequate savings), I can see the attraction in taking the maximum lump sum from your LGPS pension, albeit that the commutation rate is on the modest side - I have seen worse (I think I can remember  one poster mentioning  a scheme offering a little over 10:1).

Whatever your decision, I hope that your health will allow you to get the best out of your retirement years - have fun, but avoid the
"cigarettes and whisky and wild,wild wimmin"?

Mind you, I can just hear some wag saying "But where would be the fun in that......"