Any NHS / Local authority DB Pension experts?

lg13mza

Earlier this year my wife moved employer from Local authority to nhs.  She'd been with the local authority since 2001.  We enquired about moving her defined benefit pension to the nhs.  We've recently been given a transfer value.  Neither of us are particularly clued up about the benefits and potential pitfalls of proceeding with the transfer.  Does anyone have any tips on whether its a good idea to transfer or not?  Or what questions we should be asking? TIA

GunJack

Firstly, what is the value today of her lgps pension, £per annum? Note this is different to a transfer value.

Secondly, have you enquired with the NHS scheme as to how much pension p.a. that lgps will get her if transferred in?

Have you compared retirement ages between the 2 schemes, i.e. if she left it deferred in lgps would that be able to be accessed earlier than NHS?

How many years does she have left before retirement age of the 2 schemes?

These are starter for 10 type questions, there will be others depending on answers....

Marcon

lg13mza said:

Earlier this year my wife moved employer from Local authority to nhs.  She'd been with the local authority since 2001.  We enquired about moving her defined benefit pension to the nhs.  We've recently been given a transfer value.  Neither of us are particularly clued up about the benefits and potential pitfalls of proceeding with the transfer.  Does anyone have any tips on whether its a good idea to transfer or not?  Or what questions we should be asking? TIA

Start by asking the NHS for details of how her NHS pension would be increased by making any such transfer. 

Bear in mind she only has 12 months to transfer in, so the clock is ticking!

hyubh

lg13mza said:

Earlier this year my wife moved employer from Local authority to nhs.  She'd been with the local authority since 2001.  We enquired about moving her defined benefit pension to the nhs.  We've recently been given a transfer value.  Neither of us are particularly clued up about the benefits and potential pitfalls of proceeding with the transfer.  Does anyone have any tips on whether its a good idea to transfer or not?  Or what questions we should be asking? TIA

As things stand your wife's LGPS pension is in three parts, final salary 1/80 pension 3/80 lump sum, final salary 1/60 pension, and CARE 1/49. The first part is in respect of membership to April 2008, the second for membership to either April 2014 or April 2022 depending on what's better under the McCloud remedy, and the last for the remainder.

The main benefit of transferring is maintaining a final salary link for the final salary accrual, i.e. the final pay applicable being on leaving the NHS rather than LGPS. (Remember final pay here = full time equivalent, if she is part time.) So if her rate of pay on leaving the NHS will likely be higher, allowing for inflation, than her rate of pay on leaving the LGPS, transferring will have been opportune.

That said, transferred, all final salary service will be converted to NHS 2008 scheme benefits. The NHS 2008 scheme was very similar to LGPS 2008, so 1/60, no standard lump sum. Aside from retaining a final salary link, then, transferring would replace the 1/80 pension 3/80 lump sum component with a larger 1/60 one.

As for the CARE part, transferring would adjust it a bit. However it would continue to attract the LGPS revaluation rate rather than the (higher) NHS one, since that's just how 'Club' transfers work. So in principle transferring or not shouldn't make much of a difference for the CARE part. This is because the LGPS in-service revaluation rate for CARE pension is practically identical to how a deferred public sector pension revalues (both are CPI, the deferred revaluation just has a floor of zero were inflation go negative).

Brie

Consider also if there's a benefit to having the 2 pensions separate.  This way she can take them differently, at different times, different tax free lumps etc.  

hyubh

Marcon said:

lg13mza said:

Earlier this year my wife moved employer from Local authority to nhs.  She'd been with the local authority since 2001.  We enquired about moving her defined benefit pension to the nhs.  We've recently been given a transfer value.  Neither of us are particularly clued up about the benefits and potential pitfalls of proceeding with the transfer.  Does anyone have any tips on whether its a good idea to transfer or not?  Or what questions we should be asking? TIA

Start by asking the NHS for details of how her NHS pension would be increased by making any such transfer.

Just looking at the NHS pension credit on transferring could be misleading, given it will almost certainly be higher than the deferred LGPS pension due to the latter's 3/80 lump sum being converted away.

Marcon

hyubh said:

Marcon said:

lg13mza said:

Earlier this year my wife moved employer from Local authority to nhs.  She'd been with the local authority since 2001.  We enquired about moving her defined benefit pension to the nhs.  We've recently been given a transfer value.  Neither of us are particularly clued up about the benefits and potential pitfalls of proceeding with the transfer.  Does anyone have any tips on whether its a good idea to transfer or not?  Or what questions we should be asking? TIA

Start by asking the NHS for details of how her NHS pension would be increased by making any such transfer.

Just looking at the NHS pension credit on transferring could be misleading, given it will almost certainly be higher than the deferred LGPS pension due to the latter's 3/80 lump sum being converted away.

But it's still the first step...just one you need to take with your eyes open.

lg13mza

Thanks for the responses so far.  We've got until early April to decide, but it's taken since July to get the CETV figure!  The annual figure currently stands at £11300.  We haven't got the NHS valuation yet so I may be jumping the gun a bit.

To answer some of the other questions; we hope to not have to draw on this pension until state pension age regardless of transfer or not.  She's 20 years away from that, but if all goes to plan we both hope to retire at some point in the next 5 years.  The intention is to survive on savings for a few years until I can drawdown my DC pension.  That should then cover us until state pension age.

What probably could be an important point is that she was only working part-time at the LA.  She is now full-time and therefore earning more than 2x what she was.  That is likely to stay the case for the foreseeable future, possibly to retirement, but not 100% guaranteed.  She may wish to reduce her hours and continue to work for longer.

crv1963

I think it boils down to 
1) How much pension she will get, 2) when she will get it and if this is of any material difference to her long term plans? For instance is some of the LGPS due to go into payment before state pension age? If so she needs to bear in mind the NHS Scheme Notional Retirement Age is the State Pension Age so it maybe keep that part for earlier unreduced payment as opposed to taking later.

If figure annually is roughly 11.5k pa payable at a NRA that is even two years younger than SPA then she needs to be sure that the NHS pension reflects the 23k she possibly may have had paid to her- an imperfect example I know.

It may be better to keep the NHS and LGPS separate but only you as she can form that view. NHS Scheme is 1/54 accrual rate and death in service payable after two years calendar membership,

hyubh

lg13mza said:

To answer some of the other questions; we hope to not have to draw on this pension until state pension age regardless of transfer or not.

Since she started before September 2006, a small part of her LGPS pension will benefit from the '85 year rule' left as it is (depending on her age, that may mean her 80ths pension wouldn't have an actuarial reduction if taken at 60). However the different components of a deferred LGPS pension can't be taken at different times, i.e. actually benefiting from 85 year rule protections would necessitate taking an actuarial reduction on all her post-April 2008 pension. So purely on that score, an intention not to retire at 60 would be a small point in favour of transferring: since a final salary transfer on 'Club' rules is intended to produce equivalent benefits, losing the 'rule of 85' protection for her pre-April 2008 pension would be counteracted in the NHS service credit calculation.

What probably could be an important point is that she was only working part-time at the LA.  She is now full-time and therefore earning more than 2x what she was.

For assessing whether transferring would be good or not, this is irrelevant, since what counts in both the LGPS and NHS final salary schemes is the full time equivalent pay. So if her rate of pay on leaving the NHS came to be higher than her rate of pay on leaving the LGPS, allowing for inflation, then transferring would have been a good thing for the value of her pre-14/pre-22 service irrespective of part or full time working.

hyubh

crv1963 said:

I think it boils down to 
1) How much pension she will get, 2) when she will get it and if this is of any material difference to her long term plans? For instance is some of the LGPS due to go into payment before state pension age? If so she needs to bear in mind the NHS Scheme Notional Retirement Age is the State Pension Age so it maybe keep that part for earlier unreduced payment as opposed to taking later.

The final salary part of the transfer will be 65 (same as her LGPS 60ths pension left as-is), only the CARE part will be SPA (like her LGPS CARE pension left as-is).