LGPS - worth it?

Time2count

I had a 'welcome to the pension scheme ' webinar last week with my LGPS provider. Now I might have misunderstood (waiting for the docs to be emailed over), however it has left me wondering if there is any point in being a member other than the ill health retirement/ death in service benefits etc.
I pay in 6.8% monthly. I am a post-2016 member. My understanding is each year I am paying in I add to my pot 1/49th of that year's pay. To keep it simple let's say my salary is £49k (it's actually less). Each year £1000 is therefore added to my pot (yes, plus inflation uplift). If I am a member for 20 years then my retirement pot is £20k plus inflation. Unless that is per year, then it does seem rather pointless, or have I massively misunderstood?
Even if I were to be earning double that salary for 50 years, that would only give me a £100k pot for retirement.
The main reason I am thinking I will stay in, is they said for every £1 we withdraw as a lump sum, they will pay £12 so withdraw a quarter of my £20k and I'll get £60k as a lump sum. But again I fear that I've got that wrong as well, because that actually seems a decent deal!

So have I misunderstood the whole thing? Is my 1/49th for each year worked turned into an annual payment or is that really the whole lot for life?

Please keep the answers simple I am not really clued-up on pensions. Thanks

NoMore

It is per year, its not a pot its a defined benefit pension. Every year, the annual amount you will receive goes up by 1/49 of your pay for that year. Please opt in, its a good pension.

Marcon

Time2count said:

I had a 'welcome to the pension scheme ' webinar last week with my LGPS provider. Now I might have misunderstood (waiting for the docs to be emailed over), however it has left me wondering if there is any point in being a member other than the ill health retirement/ death in service benefits etc.
I pay in 6.8% monthly. I am a post-2016 member. My understanding is each year I am paying in I add to my pot 1/49th of that year's pay. To keep it simple let's say my salary is £49k (it's actually less). Each year £1000 is therefore added to my pot (yes, plus inflation uplift). If I am a member for 20 years then my retirement pot is £20k plus inflation. Unless that is per year, then it does seem rather pointless, or have I massively misunderstood?
Even if I were to be earning double that salary for 50 years, that would only give me a £100k pot for retirement.
The main reason I am thinking I will stay in, is they said for every £1 we withdraw as a lump sum, they will pay £12 so withdraw a quarter of my £20k and I'll get £60k as a lump sum. But again I fear that I've got that wrong as well, because that actually seems a decent deal!

So have I misunderstood the whole thing? Is my 1/49th for each year worked turned into an annual payment or is that really the whole lot for life?

Please keep the answers simple I am not really clued-up on pensions. Thanks

You've misunderstood, probably because you've never yet had an opportunity to join a 'defined benefit' scheme. This isn't just a 'pot' (not even an M&S pot...); it's a promise to pay you a tax free lump sum + an annual pension for life once you retire.

Hopefully the docs will make it clearer, but as requested, here's the simple answer: it's a fantastic scheme and you are very lucky to have a chance to join. 

QrizB

Time2count said:

I pay in 6.8% monthly. I am a post-2016 member. My understanding is each year I am paying in I add to my pot 1/49th of that year's pay.

There is no pot.

Each year, you earn a pension of 1/49th of your pay, payable every year from normal retirement age until you die.

Time2count said:

 Each year £1000 is therefore added to my pot (yes, plus inflation uplift).

Each year £1000 is added to your annual pension.

Time2count said:

If I am a member for 20 years then my retirement pot is £20k plus inflation.

If you are a member for 20 years, your pension is £20k pa plus inflation.

Time2count said:

Unless that is per year, then it does seem rather pointless, or have I massively misunderstood?

It is per year, every year until you die. Plus a survivor's pension for your husband/wife/civil partner.

Time2count said:

... they said for every £1 we withdraw as a lump sum, they will pay £12 so withdraw a quarter of my £20k and I'll get £60k as a lump sum. But again I fear that I've got that wrong as well, because that actually seems a decent deal!

Giving up £1 pa of mension for a £12 lump sum is a pretty poor deal, despite being apparently popular among LGPS retirees.

LHW99

If I am a member for 20 years then my retirement pot is £20k plus inflation. Unless that is per year, then it does seem rather pointless, or have I massively misunderstood?

It will be per year, and there will be at least some inflation linking whenin payment (not sure if there would be a cap - eg the higher of inflation / 5%).

they said for every £1 we withdraw as a lump sum, they will pay £12

I suspect what that means is that you can convert some of your annual pension income into additional lump sum when you take it. If the ratio is 12:1 though that may not be a good rate.

Someone who knows the LGPS will explain better, but there are several threads here which say why the LGPS scheme is one of the best pensions you could have. Apart from your 6.8%, the employer is most likely paying in up to 30% of your salary, so don't even think of not joining.

Time2count

Ah so if I keep to my theoretical £20k saved.
Are you saying I get that £20k per year upon retirement?
That makes it seem a much better plan.

Marcon

OK @Silvertabby - over to you...!

Time2count

Thank you for the replies. I've actually been in the scheme for 5 years, but only just been offered an introduction to it! And yes I know my employer pays significantly more than I do - I have sight of the budget and the pension costs are eye-watering!
I always thought it was one of the coveted pensions but the webinar last week made me doubt it. No doubt the slides when they arrive will clear it up!
Thank you for all replies 👍

Time2count

Sorry, another stupid question. It is based on 1/49th of pay for each year I pay in. Is it therefore worth it/pointless to increase my contributions?

MX5huggy

You are not the first to make this mistake, I think it is a problem that should be addressed with their wording in you example the statement will say you have accrued a pension of £1000 for the 1 years contribution or it will say we estimate your pension will be £20000 on retirement when you are 67/68. Nowhere does it say this is an annual pension but it is indexed linked toCPI with no cap. 

Now does your employer offer Salary Sacrifice AVC’s? Often from AVCWise because that is a cherry 🍒 on top of the LGPS Cake. 

Time2count

Yes there was definitely mention of AVCs but I am wondering how that helps the pension amount? If I added more, let's be daft and say I put ALL my salary into the pension, surely that won't change the amount received at retirement as I will still be getting the 1/49th per year if the scheme?
Expect I have that wrong too!