Transfer DC into LGPS?

gwbuk

I'm 61 years old and recently joined LGPS in a low-pay part-time role. I have three DC pots from previous employments that total approximately £900K.

Before the new job, I had been considering using some of the £900K (maybe up to half of it) to buy an annuity in a few years time. I'm now wondering whether transferring it into LGPS might be a better idea (I'd be treating my LGPS transfer like a deferred annuity). To this end, I got a transfer in quote from LGPS for the smallest pot, and they applied a transfer factor of 16.93, which works out to £5.9K for £100K. It's impossible to predict the future, but this seems a pretty good deal compared to what I'd likely get trying to buy an equivalent inflation-linked annuity with survivor benefits in a few years. 

I'm going to need to get some professional advice on this, but I'd like to invite any thoughts from others?

QrizB

Yes, that sounds like a pretty good deal.

Silvertabby

Just note that this £5.9K is payable from your NRA (67, same as your SPA).  You can retire and take your LGPS pension before this, but both parts of your pension - the transfer in and your normal accrual - will be subject to early payment reductions. 

dunstonh

The financials of the LGPS look good in respect of income relative to value.   However, there are a couple of things to be aware of
1 - legacy.  The DC pot can be passed on.   The DB cannot
2 - early death or you dying significantly earlier than spouse.   Spouse pension of 50% would hurt the breakeven point
3 - early retirement.  If you plan earlier than state/scheme pension retirement then having a DC pension available to draw on without needing to use the DB pension early with a reduction could be beneficial.
4 - Lump sum requirements in retirement - A lot of people focus on income in retirement but forget they will have capital needs as well.    You cannot dip into a DB pension but you can a DC pension.

but this seems a pretty good deal compared to what I'd likely get trying to buy an equivalent inflation-linked annuity with survivor benefits in a few years. 

You probably wouldn't be looking at annuity for the DC pension anyway (not enough info but with two state pensions and a DB scheme, it is more likely drawdown would be the most viable option if remaining in DC)

Effectively, you would be better focusing on scheme pension vs flexible pension benefits.

gwbuk

dunstonh said:

The financials of the LGPS look good in respect of income relative to value.   However, there are a couple of things to be aware of
1 - legacy.  The DC pot can be passed on.   The DB cannot
2 - early death or you dying significantly earlier than spouse.   Spouse pension of 50% would hurt the breakeven point
3 - early retirement.  If you plan earlier than state/scheme pension retirement then having a DC pension available to draw on without needing to use the DB pension early with a reduction could be beneficial.
4 - Lump sum requirements in retirement - A lot of people focus on income in retirement but forget they will have capital needs as well.    You cannot dip into a DB pension but you can a DC pension.

but this seems a pretty good deal compared to what I'd likely get trying to buy an equivalent inflation-linked annuity with survivor benefits in a few years. 

You probably wouldn't be looking at annuity for the DC pension anyway (not enough info but with two state pensions and a DB scheme, it is more likely drawdown would be the most viable option if remaining in DC)

Effectively, you would be better focusing on scheme pension vs flexible pension benefits.

Thank you, good points to mull over.  I'm leaning towards moving enough from the DC pots to provide say circa £20k pa from the  LGPS (together with state pension, it should provide a guaranteed, inflation-linked, 'pay the bills' base income), and leaving the rest in DC for flexibility. Based on the transfer factor quoted, I'd still have maybe ~£500K in the DC.  

Time to get some 1:1 advice me thinks.