Deferred Local Government Pension

Daibachysoldiwr

I have two Local Govt pensions, one which I am currently paying into, and one which I stopped contributing to some time ago and is a deferred pension (basically I forgot to transfer it to my current pension fund). I recently turned 60 and my deferred pension fund asked me if I want to start taking my pension, or to continue to defer it. I know little about pensions and it had never occurred to me that I could take a pension without retiring. I can't think of any reason why I shouldn't start taking the pension (and the lump sum) now, can anyone point out any reasons why I wouldn't do this?

molerat

Tax ? ...............

Silvertabby

When did you join/leave this post?  If you meet R85 then your benefits would be payable in full from age 60.  

Brie

This was suggested to me too (but too late) on the basis that I was in a low tax bracket and taking the pension wouldn't change that.  Obviously if that extra £5k a year or whatever means you are paying 40% on some or all of it I'd suggest you continue to defer.  

Daibachysoldiwr

Brie said:

This was suggested to me too (but too late) on the basis that I was in a low tax bracket and taking the pension wouldn't change that.  Obviously if that extra £5k a year or whatever means you are paying 40% on some or all of it I'd suggest you continue to defer.  

It's about £8k a year plus a £25k lump sum.. It would take me a little bit into the higher tax bracket, so some of it would be taxed at 40%, but, as I understand it, only the bit over the threshold, is that right?

Daibachysoldiwr

Silvertabby said:

When did you join/leave this post?  If you meet R85 then your benefits would be payable in full from age 60.  

I left it about 20 years ago but I had transferred pensions from a couple of previous jobs into it. I don't meet the R85, but I'm still working and paying into another LG pension fund. Not planning on retiring for another few years yet.

Silvertabby

Daibachysoldiwr said:

Silvertabby said:

When did you join/leave this post?  If you meet R85 then your benefits would be payable in full from age 60.  

I left it about 20 years ago but I had transferred pensions from a couple of previous jobs into it. I don't meet the R85, but I'm still working and paying into another LG pension fund. Not planning on retiring for another few years yet.

Are you sure about that?  The period in deferment counts towards R85, so 5 years LGPS active membership (transferred in benefits probably don't count)  plus 20 years of deferment plus age 60 = 85.

If that"s the case, then there's really no benefit in deferring payment.  Even if you don't quite meet R85 at 60, you should meet it before 65 (normal NRA for pre 2014 benefits).

Daibachysoldiwr

Silvertabby said:

Daibachysoldiwr said:

Silvertabby said:

When did you join/leave this post?  If you meet R85 then your benefits would be payable in full from age 60.  

I left it about 20 years ago but I had transferred pensions from a couple of previous jobs into it. I don't meet the R85, but I'm still working and paying into another LG pension fund. Not planning on retiring for another few years yet.

Are you sure about that?  The period in deferment counts towards R85, so 5 years LGPS active membership (transferred in benefits probably don't count)  plus 20 years of deferment plus age 60 = 85.

If that"s the case, then there's really no benefit in deferring payment.  Even if you don't quite meet R85 at 60, you should meet it before 65 (normal NRA for pre 2014 benefits).

OK thanks I'll have to check that. When I spoke to my deferred pension fund, they told me that the amount of my pension and lump sum will not increase if I defer, so I don't see that there's any advantage in doing so.

Silvertabby

Daibachysoldiwr said:

Silvertabby said:

Daibachysoldiwr said:

Silvertabby said:

When did you join/leave this post?  If you meet R85 then your benefits would be payable in full from age 60.  

I left it about 20 years ago but I had transferred pensions from a couple of previous jobs into it. I don't meet the R85, but I'm still working and paying into another LG pension fund. Not planning on retiring for another few years yet.

Are you sure about that?  The period in deferment counts towards R85, so 5 years LGPS active membership (transferred in benefits probably don't count)  plus 20 years of deferment plus age 60 = 85.

If that"s the case, then there's really no benefit in deferring payment.  Even if you don't quite meet R85 at 60, you should meet it before 65 (normal NRA for pre 2014 benefits).

OK thanks I'll have to check that. When I spoke to my deferred pension fund, they told me that the amount of my pension and lump sum will not increase if I defer, so I don't see that there's any advantage in doing so.

Sounds like you do meet R85 at 60.

AlanP_2

Daibachysoldiwr said:

Brie said:

This was suggested to me too (but too late) on the basis that I was in a low tax bracket and taking the pension wouldn't change that.  Obviously if that extra £5k a year or whatever means you are paying 40% on some or all of it I'd suggest you continue to defer.  

It's about £8k a year plus a £25k lump sum.. It would take me a little bit into the higher tax bracket, so some of it would be taxed at 40%, but, as I understand it, only the bit over the threshold, is that right?

That's right, only the bit over the threshold.

To maximise the benefit you could always pay that portion in to the LGPS AVC scheme, get the 40% tax break and then withdraw it tax free when you start to take your pension from your current employment.

daveyjp

If your pension is unexpected income and it is available you could salary sacrifice the equivalent of the pension into AVCs. 

 Reduce your salary by £8k (as long as this still keeps you above minimum wage), pay this £8k into AVCs, which will only cost you about £5,800.  You are then below the threshold for 40% tax and saving for another 100% tax free lump sum when you retire fully.