Pension advice

pedro789

Hi

I wanted to get bit of advice on my current financial/pension situation.

I just turned 55 and was seriously thinking about (semi) retirement. I've worked in local government for 25 years and built up decent pension pot.

Anyway I've just been offered job in private sector on more money. The plan is to work for another 5 years while my son is in uni. Someone's got to pay his London rent/lifestyle 😂.

My plan is to take my local government pension now and save as much as possible from my salary and retire when I'm 60.

My new employers pension is with Scottish Widows - 6% contribution, compared to 8.5% for local govt.

I'm at the stage of my life where I don't want to take too many financial risks, but I do want to find a low(ish) risk way of saving/investing over next 5 years.

Any thoughts or traps to avoid re: pensions? Maybe one for financial adviser?

Many thanks

ewaste

Given your age your local Government Pension is worth at least 30% of your salary. Therefore moving to the private sector would need to offer a combination of better quality of life and a very healthy payrise. What is the DC contribution rate for the new employer?

If your LGPS contribution rate is 8.5% that puts you in the £53,301 to £74,700 contribution band. In other worlds a higher rate taxpayer and accruing a nice Defined Benefit of 1/49th of salary. 

It's important to look at the whole renumeration package including pensions but especially terms and conditions. It's often difficult for people to look beyond the headline salary on offer for a role especially if for those of us who've been in the public sector for a while. 

Albermarle

As above, your pension contributions might be a bit less, but the employers contribution will be a lot less, as funding the very good LGPS scheme costs the employer/taxpayer a lot.

Otherwise if you take your LGPS pension at 55 it will be significantly reduced due to taking it early. Why do that when you will have an employment income coming in ?

I am afraid with a public sector pensions and a new DC pension with nothing in it, you will not be of interest to a financial advisor. If you do move jobs you will need to have a look at the different investment options in the SW pension.

Phossy

I'd suggest you get a formal Pension Projection from the age of 60 and the normal retirement age before you make any decisions. That way you can model out the various scenarios and see what the pension is worth to you.

Marcon

pedro789 said:

My plan is to take my local government pension now and save as much as possible from my salary and retire when I'm 60.

Why? Wouldn't it be better to live on your salary and take your LGPS benefits when you retire, rather than taking them so early they'll have a substantial reduction for early payment? Your LGPS pension will increase from the time you leave to the time you draw your benefits - it isn't 'frozen'.

Hoenir

pedro789 said:

I'm at the stage of my life where I don't want to take too many financial risks, but I do want to find a low(ish) risk way of saving/investing over next 5 years.

Your current plan appears to be financially detrimental. A conversation with a financial advisor would be advisable. As would help you see matters in a totally different light. 

MEM62

pedro789 said:

My plan is to take my local government pension now and save as much as possible from my salary and retire when I'm 60.

If you are going to be still employed why take your pension?  That makes no sense - particularly with the reduction that will be applied.  Leave it where it is.  

pedro789 said:

I'm at the stage of my life where I don't want to take too many financial risks, but I do want to find a low(ish) risk way of saving/investing over next 5 years.

You plan at the moment is not the most financially prudent but than can be re-thought.  Saving for the next five years for what goal?  
  

finbaar

Where I work you take a 5% reduction for each year you retire early, with a normal retirement age of 60. If your pension is the same - or similar - then do not take your pension 5 years early. Reducing your pension by 25% AND having it taxed at 40% between 55 and 60 will mean any extra money will be low and after about the age of about 67 you will be worse off than not taking the pension early. Live to 80 and you will be tens of thousands out of pocket.