Should I move the paltry amount I have in a LGPS pot, or leave as-is?

BrotherMaynard

Hi folks!  MSEforum newbie here.  Hoping for a bit of friendly advice, please!

Approx. 12 months ago I started a job that paid pension contributions into a LGPS pot.  My hours were few, and contributions small.  There's around the £630 mark in there to-date.  Paltry, like I say.

I'm leaving the role for a new job, where I'll be re-enrolled back into the NEST scheme. 

My first thought was to transfer the small LGPS amount into the existing NEST pot and have done with it.  £630 is peanuts in the grand scheme of things.  But then I thought, would it be better to leave it where it is, despite how small the figure?  I'm quite some way from retirement, yet.  What would you guys do?  Any advice would be much appreciated

Marcon

BrotherMaynard said:

Hi folks!  MSEforum newbie here.  Hoping for a bit of friendly advice, please!

Approx. 12 months ago I started a job that paid pension contributions into a LGPS pot.  My hours were few, and contributions small.  There's around the £630 mark in there to-date.  Paltry, like I say.

I'm leaving the role for a new job, where I'll be re-enrolled back into the NEST scheme. 

My first thought was to transfer the small LGPS amount into the existing NEST pot and have done with it.  £630 is peanuts in the grand scheme of things.  But then I thought, would it be better to leave it where it is, despite how small the figure?  I'm quite some way from retirement, yet.  What would you guys do?  Any advice would be much appreciated

Are you sure you've got the option to leave it where it is? With under two years of scheme membership,  you normally have an option to take a refund of your own (not any employer) contributions minus tax; or a transfer (which does include 'something from the employer') to a new pension arrangement.

Universidad

BrotherMaynard said:

Hi folks!  MSEforum newbie here.  Hoping for a bit of friendly advice, please!

Approx. 12 months ago I started a job that paid pension contributions into a LGPS pot.  My hours were few, and contributions small.  There's around the £630 mark in there to-date.  Paltry, like I say.

I'm leaving the role for a new job, where I'll be re-enrolled back into the NEST scheme. 

My first thought was to transfer the small LGPS amount into the existing NEST pot and have done with it.  £630 is peanuts in the grand scheme of things.  But then I thought, would it be better to leave it where it is, despite how small the figure?  I'm quite some way from retirement, yet.  What would you guys do?  Any advice would be much appreciated

It's probably not £630. It's probably £630 per year from retirement for the rest of your life. In practice, would probably be worth five figures.

It would be sensible to learn the difference between defined benefit and defined contribution schemes, as by contrast what is in your Nest is just a pot of money, rather than an annual salary. 

However, as stated it is very unlikely you have the option to keep the LGPS pension unless you were paying in for more than 2 years, or transferred another pension in when you started. 

In which case you'll be offered the opportunity to transfer it somewhere else, or get a refund. In value terms that's likely to be the difference between getting something like 400 pounds in your pocket or 4000 pounds in your pension.
(Made up numbers, but the difference could be that large.)

EDIT: just noticed you said you had few hours, in which case it's not that likely you built up an annual pension of 630 in a year, so maybe you think that's how much you paid in... In which case, the same logic applies but with lower (also made up) figures. When you transfer out you get to take account of what your employer contributed too. But the refund is only on your own contributions... And they're taxed!

Dazed_and_C0nfused

Universidad said:

BrotherMaynard said:

Hi folks!  MSEforum newbie here.  Hoping for a bit of friendly advice, please!

Approx. 12 months ago I started a job that paid pension contributions into a LGPS pot.  My hours were few, and contributions small.  There's around the £630 mark in there to-date.  Paltry, like I say.

I'm leaving the role for a new job, where I'll be re-enrolled back into the NEST scheme. 

My first thought was to transfer the small LGPS amount into the existing NEST pot and have done with it.  £630 is peanuts in the grand scheme of things.  But then I thought, would it be better to leave it where it is, despite how small the figure?  I'm quite some way from retirement, yet.  What would you guys do?  Any advice would be much appreciated

It's probably not £630. It's probably £630 per year from retirement for the rest of your life. In practice, would probably be worth five figures.

It would be sensible to learn the difference between defined benefit and defined contribution schemes, as by contrast what is in your Nest is just a pot of money, rather than an annual salary. 

However, as stated it is very unlikely you have the option to keep the LGPS pension unless you were paying in for more than 2 years, or transferred another pension in when you started. 

In which case you'll be offered the opportunity to transfer it somewhere else, or get a refund. In value terms that's likely to be the difference between getting something like 400 pounds in your pocket or 4000 pounds in your pension.
(Made up numbers, but the difference could be that large.)

EDIT: just noticed you said you had few hours, in which case it's not that likely you built up an annual pension of 630 in a year, so maybe you think that's how much you paid in... In which case, the same logic applies but with lower (also made up) figures. When you transfer out you get to take account of what your employer contributed too. But the refund is only on your own contributions... And they're taxed!

And that tax isn't ever refundable.

A transfer is definitely the best option here if you cannot have a deferred LGPS pension.

hyubh

BrotherMaynard said:

Hi folks!  MSEforum newbie here.  Hoping for a bit of friendly advice, please!

Approx. 12 months ago I started a job that paid pension contributions into a LGPS pot.  My hours were few, and contributions small.  There's around the £630 mark in there to-date.  Paltry, like I say.

I'm leaving the role for a new job, where I'll be re-enrolled back into the NEST scheme. 

My first thought was to transfer the small LGPS amount into the existing NEST pot and have done with it.  £630 is peanuts in the grand scheme of things.  But then I thought, would it be better to leave it where it is, despite how small the figure?  I'm quite some way from retirement, yet.  What would you guys do?  Any advice would be much appreciated

As Marcon says, unless you have a previous deferred benefit in the scheme (or transferred into the LGPS) you won't have met the 'vesting period'. If you were a member of the LGPS for at least three months however, you will be able to transfer out to keep the value of the employer contribution (which won't be simply employee + employer contribution, but better than a refund of your own contributions net of tax).

Note you may need to explicitly request this from the administrator - nearly all short service members who choose take a refund, even though that's not really in their interests, and any sort of transfer compared to a refund is a faff to process!

SVaz

It won’t be £630 per year after only 1 year surely? 
My Wife worked for the LA for 6 years part time (15 hours) and her pension was only around £600 pa.  Her cetv was just shy of £10k and she transferred it into her Sipp. 

Dazed_and_C0nfused

SVaz said:

It won’t be £630 per year after only 1 year surely? 
My Wife worked for the LA for 6 years part time (15 hours) and her pension was only around £600 pa.  Her cetv was just shy of £10k and she transferred it into her Sipp. 

You would probably need to have earned just over £28k to get that. 

LGPS accrual rate is 1/49th and had a 10.1% uplift immediately after the end of the scheme year.

£28,040 x 2.0408% = £572.24
£572.24 + 10.1% = £630.03

Universidad

Dazed_and_C0nfused said:

You would probably need to have earned just over £28k to get that. 

Agreed, it seemed like a perfectly reasonable amount for a year, until I parsed that the poster hadn't been working full time hours. 

BrotherMaynard

Thank you all for your replies. They have been enlightening! I will speak to the pension team, now that I've found contact details for them. When I started the job I was given zero information on pensions, scheme types, contributions. Nothing. I shall get on to them! Thanks again 

itsthelittlethings

I would leave it, even if it’s a tiny amount you won’t do better in NEST than a LGPS as I understand.

Silvertabby

Leaving it isn't an option if OP hasn't met the 2 year vesting period.

A transfer to another pension scheme is the way to go.