Advice on taking LGPS Pension early.....

bripat

Everyone has different lifestyles and more importantly health, I took the large tax-free lump sum due to me having a triple heart bypass aged only 49 and I'm still working 3 days a week after going on flexible retirement. I still have 2 yrs to work now I'm back in the lgps and pumping as much into the Avcs as I can from my wages. You never know what is around the corner at any age.

Moonwolf

These are the sort of the questions to ask yourself.

Question 1: Does the reduced pension plus state pension plus other pensions give you the lifestyle you want and the certainty you want.

Have you done a budget?

If the answer is no you know what to do.

(I have decided not to take the maximum lump sum on my NHS pension. The NHS, other DB and state pensions add up to my safe target, and they don't with a 25% reduction in the NHS pension).

Question 2: Is it good value for money?  The best use of your finances?

Unless you know you might die early, probably not.  Most calculations will show you better off after 12-20 years taking the larger pension.

Question 3: What will you do with the money.

a) Paying off expensive debt that is weighing you down:  Probably good, but do you have the issues that got you into debt under control?

b) Putting it into a savings account for a rainy day: Probably bad, if you die young with the money in a savings unspent account what benefit have you had, or live longer than average you will lose out.

c) Putting it aside for relatives inheritance: A very personal decision and laden with issues around IHT, gifts, dying early and needing it for care.

d) Aiming to spend a lot on holidays and stuff while younger (and the remaining pensions are more than enough): I'd say go for it.

Silvertabby

I was there for the first flood of transfers out from the LGPS after the introduction of 'pension freedoms'.  Yes, I know the 'freedoms' weren't intended to apply to DB schemes, but just try telling that to the flood of "gimme my money" callers in the first few weeks!

My job included telling people what they would be giving up by transferring out of the LGPS, especially those who were still active members and so would have to opt out before the transfer could be processed.  Hand on heart, I don't recall even one person telling me that they expected to get a better return by investing and then limiting withdrawals to sensible limits.  But I can relate many tales of plans for new kitchens/bathrooms/cars/family holidays/daughter's wedding.

At the time, my colleagues and I gave it 10 years before the penny dropped and many of these people would start to question where their retirement funds had gone.