Local Government Pension Scheme - Transferring Benefits from previous post to current post

Garnigo_Tarmeister

I have a question regarding the Local Government Pension Scheme and transferring my benefits from a previous post to my current post. I've had a letter about this explaining it all but I am still confused!

So, for background, I was part of the LGPS in a previous job from April 2005 to September 2009 when I left. Last June (2023) I started a new job and was enrolled into the LGPS again. I've recently received a letter regarding my option to transfer my benefits from my original job from 2005 to my current post I started last year.

The letter says:

"If you chose to transfer your deferred benefits, this will purchase an amount of earned pension, which will be added to your pension account with your latest period of membership. 

In this case, a transfer would purchase earned pension which will be credited to your pension account in the year in which your election is received.

The earned pension purchased by the transfer will be calculated based on your Normal Pension Age in the scheme, which is equal to your State Pension Age, or age 65 if this is later. If you elect to receive payment of your benefits before Normal Pension Age, your pension will be reduced."

For info, I am 45 and the original pension (from the 2005 job) is worth £2,113 a year. I was also sent a 'key facts document', as shown below.

Should I transfer my benefits from the previous post to my current post? Or should I leave them separate? Thank you in advance

Silvertabby

Crystal ball time, I'm afraid.  As there is a gap of more than 5 years between your two periods of membership, if you were to combine then your old final salary pension benefits would be converted to CARE.  The fact that your deferred record has R85 protections will be factored into the calculation, but your combined pension will then only be payable from SPA (or earlier subject to early payment reductions).

Pros and cons:

Leave separate.  R85 from age 60 in respect of your pre 2008 accruals, so deferred  benefits may be taken then (with reductions restricted to your post 2008 accruals) even if you are still working in Local Government.  For clarity, R85 in this case includes deferred membership as well as 4 years actual service.  On the downside, if made redundant from current post then deferred benefits won't be included.  In the case of ill health, different rules apply so no guarantee that deferred benefits would also be paid early.

Combine.  Only payable in full from SPA in the case of normal retirement.  Full value of combined benefits payable in the event of redundancy (currently minimum age of 55) or ill health (any age).

Back to that crystal ball....

Garnigo_Tarmeister

Thank you so much for replying! I have no idea what R85 is, what CARE is, or what SPA is, but you are saying that it is hard to predict what is the best option, which is really helpful. Thanks again.

hyubh

Garnigo_Tarmeister said:

Thank you so much for replying! I have no idea what R85 is, what CARE is, or what SPA is, but you are saying that it is hard to predict what is the best option, which is really helpful. Thanks again.

CARE = benefit structure of your current pension. SPA = state pension age = the normal pension age of your CARE pension, where 'normal pension age' means when you can draw it without reduction for going 'early'. R85 = rule of 85 = the rule that means much your old pension, left where it is, will be able to be taken from age 60 without reduction (your old pension has a normal pension age of 65, however the rule of 85 pertains to the pre-April 2008 part, and that will get the effectively get the age down to 60 given your dates).

The older pension left separate increases by CPI each year. The older pension transferred purchases a credit in your current pension that also increases by CPI each year. However, the credit won't equal the old pension, since the normal pension age of it is higher (SPA not 60/65), amongst other secondary differences, and the credit is intended to be fair (in a generic way).

Personally, I would say this is easier to decide than in the 'old days' pre-CARE, since you know what the credit in real terms will be at SPA (i.e. the figure quoted now). However whether you find the thought of taking your old pension at 60 attractive or not, relative to a higher combined pension, will be an individual decision..

Sarahspangles

Garnigo_Tarmeister said:

For info, I am 45 and the original pension (from the 2005 job) is worth £2,113 a year. I was also sent a 'key facts document', as shown below.

I didn’t combine my benefits from two separate LGPS periods of service. I therefore passed on the potential benefits if I was made redundant or had to retire through ill health.

I’m currently planning to take my older pension with R85 protection at 60, in my case it’s almost enough to retire on. I’m not planning to take the more recent pension until 65, when part can be paid unreduced or maybe 67.

If you feel you’re at risk of redundancy then combining might be worthwhile but if you can see scenarios like reducing your hours being attractive at 60 then keeping them separate keeps your options open.

I wonder if combining might be worthwhile if you’re later in a position to transfer to the Civil Service or NHS?

Kernowshep

Historcally R85 meant when your years of service plus age equalled 85 you could retire without a reduction in your annual pension.  This was back when the pension amount was based on your final salary, with each year worked being worth 1/60th or 1/80th of that final pay (plus a bit of a lump sum).

CARE = is a Career Average pension, in the LGPS each year you work 1/49th of your pay is added to your annual pension amount e.g. if you earn £49k p.a., your pension at retirement age will be increased by £1000 (plus CPI inflation), £24.5k would be £500 etc.etc.  If you take this before your state pension age it's reduced by about 5% per year because you get an extra 12 months of that amount (the actual reduction is on the LGPS website).