LGPS pensions - To combine or not combine?

wetweekend

I'm a council worker since 2000. Left in 2022 but went back to a new role in March this year (2024). My original pension was therefore deferred but has a final salary link (up to 2014) and has been revalued at the current date to 38k. However, my new current role has a lower salary of 26k. I understand if I combine the pensions, the first one would retain it's final salary link, but to my CURRENT lower salary, resulting in a lower annual pension and lump sum. Should I combine them with the view that, over a few years, my current salary should creep up to match my original one? Or should I leave the deferred final salary pension separate given that the value of it increases each year with it's link to inflation? I'm 53.

Silvertabby

Real crystal ball time, I'm afraid.  Your first pension, currently based on a final salary figure of £38K, will increase in value each year.  So, do you think that your current salary will exceed that before you retire?  If not, then keeping your records separate would probably be best.

BUT

If you do keep separate records, and are then made redundant with immediate access to unreduced pension benefits, then that would only apply to your current record.  Your deferred record would be fully actuarily reduced for early payment if taken at the same time.

Not so black and white should you retire on ill health grounds, as the enhancement would be based on your current record only, with the deferred record being payable without any early payments deductions.  Just more faff/paperwork with two records, and slightly different qualifying criteria.

In my day we could revisit separate records and either leave or combine, whichever worked out best for the member and their reasons for leaving.  But those days are long gone, and you now need to make an decision within 12 months of rejoining.  Hence needing a crystal ball.....

wetweekend

Many thanks, Silvertabby, much appreciated. I suppose if I was able to stay in the current role for around the next 5 years or so, then yearly cost of living rises along with the odd increment would mean I could reach £38k, but wouldn't the value of that first pension have increased even more by then, meaning I would never actually be able to 'catch-up' with it?

The redundancy issue is a concern. I feel the post is fairly secure, however, someone I spoke with recently was suggesting I should obtain some kind of income protection insurance for such an event. I presume if redundancy DID happen that I could leave the first pension deferred until retirement age and continue working elsewhere?

Re. ill health grounds, if I understand you correctly, my first pension would be payable immediately (without deductions) along with my current pension which would be enhanced to retirement age? If so, that's some comfort at least!

Many thanks in advance, it's certainly a dilemma and I need to make a decision by March. Now where's that crystal ball !..... 

Silvertabby

wetweekend said:

Many thanks, Silvertabby, much appreciated. I suppose if I was able to stay in the current role for around the next 5 years or so, then yearly cost of living rises along with the odd increment would mean I could reach £38k, but wouldn't the value of that first pension have increased even more by then, meaning I would never actually be able to 'catch-up' with it?

The redundancy issue is a concern. I feel the post is fairly secure, however, someone I spoke with recently was suggesting I should obtain some kind of income protection insurance for such an event. I presume if redundancy DID happen that I could leave the first pension deferred until retirement age and continue working elsewhere?

Re. ill health grounds, if I understand you correctly, my first pension would be payable immediately (without deductions) along with my current pension which would be enhanced to retirement age? If so, that's some comfort at least!

Many thanks in advance, it's certainly a dilemma and I need to make a decision by March. Now where's that crystal ball !..... 

1.  Yes, the value of final salary figure linked to the deferred record would increase each year in line with CPI.  2% per year? (Guess - I don't have a crystal ball!).  Realistically, you would need a decent promotion in your new post to stand any chance of catching up.

2.  Yes, you could leave your deferred record until a later date.  It would just be your current record that you would have to draw.

3.  Yes, but with the rider that slightly different criteria MAY apply.  ie, the ill health test would have to be met in the case of each post.

You are welcome!  

wetweekend

SIlvertabby, this is really valuable info and has definitely helped me reach a decision.

Once again, many thanks, and I wish you a Happy 2025 

Silvertabby

And to you!

Here's to wise decisions all round!