DB Pension Offer

Lifematters

I need help! 

So I have LGPS DB offer of £5,341.81 per annum from State Pension age (67 for me in 10 years time) for transfer of £85k DC

Wondering how to determine if this is good value or not?  Do you compare it with current annuity rates? 

I am also considering taking all my pensions in a few years time at 60 so the offer of £5,341 will be reduced, not sure by how much yet, if anybody knows, but obviously the reduction reflects it being paid out 7 years early. 

I will probably top up my DC pension again before any transfer takes place.  There was a really good thread on here a while back explaining how to work out the maximum you can pay in to a DC pension while you currently pay into a DB pension, only I can’t find it.  From memory is it your gross earnings minus your DB contributions and ignoring employer contributions? I am only working a part time job so won’t be a huge sum.

TIA

MallyGirl

It is guaranteed, probably inflation linked, income for life. A search for DB Transfer will give you plenty of info on the challenges trying to do this - and the indicative costs of £5-7.5k for the mandatory advice.
The rules on on the reduction for early commencement will be published in the scheme rules I should think

dunstonh

I am also considering taking all my pensions in a few years time at 60 so the offer of £5,341 will be reduced, not sure by how much yet, if anybody knows, but obviously the reduction reflects it being paid out 7 years early. 

Do you need to take it so early?
Could you not use the DC pension (or other assets) to fund the gap (in part or full)?

QrizB

Lifematters said:

So I have LGPS DB offer of £5,341.81 per annum from State Pension age (67 for me in 10 years time) for transfer of £85k DB.

Are you really transferring in a DB pension, or is that a mistype and it's a DC pot?

Marcon

Lifematters said:

I need help! 

So I have LGPS DB offer of £5,341.81 per annum from State Pension age (67 for me in 10 years time) for transfer of £85k DB. 

Wondering how to determine if this is good value or not?  Do you compare it with current annuity rates? 

I am also considering taking all my pensions in a few years time at 60 so the offer of £5,341 will be reduced, not sure by how much yet, if anybody knows, but obviously the reduction reflects it being paid out 7 years early. 

I will probably top up my DC pension again before any transfer takes place.  There was a really good thread on here a while back explaining how to work out the maximum you can pay in to a DC pension while you currently pay into a DB pension, only I can’t find it.  From memory is it your gross earnings minus your DB contributions and ignoring employer contributions? I am only working a part time job so won’t be a huge sum.

TIA

What are you trying to achieve? It's rarely as simple as 'maximum cash', especially if you plan to take benefits early.

Lifematters

QrizB said:

Lifematters said:

So I have LGPS DB offer of £5,341.81 per annum from State Pension age (67 for me in 10 years time) for transfer of £85k DB.

Are you really transferring in a DB pension, or is that a mistype and it's a DC pot?

Typo, should read DC. 

Lifematters

Found early reduction values online and appears it is 27.4% reduction for taking it 7 years early.  So that would be £3,878 at 60 for £85k.  That would take over 20 years to recoup so not really a fantastic offer do you think? I know the DB will increase each year but so may the DC increase by more, just not guaranteed.  Arghh decisions! 

FIREDreamer

Lifematters said:

Found early reduction values online and appears it is 27.4% reduction for taking it 7 years early.  So that would be £3,878 at 60 for £85k.  That would take over 20 years to recoup so not really a fantastic offer do you think? I know the DB will increase each year but so may the DC increase by more, just not guaranteed.  Arghh decisions! 

It looks very similar to index linked annuity rates available now at age 60 so it isn’t a rip off by any means.

MallyGirl

Lifematters said:

Found early reduction values online and appears it is 27.4% reduction for taking it 7 years early.  So that would be £3,878 at 60 for £85k.  That would take over 20 years to recoup so not really a fantastic offer do you think? I know the DB will increase each year but so may the DC increase by more, just not guaranteed.  Arghh decisions! 

DC might increase by more, or it might decrease. DB won't decrease.
Unless you are prepared to pay out £7.5k and then still have to go down the insistent client route then I would just stick with what you have.

Dazed_and_C0nfused

MallyGirl said:

Lifematters said:

Found early reduction values online and appears it is 27.4% reduction for taking it 7 years early.  So that would be £3,878 at 60 for £85k.  That would take over 20 years to recoup so not really a fantastic offer do you think? I know the DB will increase each year but so may the DC increase by more, just not guaranteed.  Arghh decisions! 

DC might increase by more, or it might decrease. DB won't decrease.
Unless you are prepared to pay out £7.5k and then still have to go down the insistent client route then I would just stick with what you have.

Isn't the op trying to determine if they should use their existing DC pension to purchase additional benefits in LGPS?  Not transfer out of LGPS.

Oppenheimer

A few years ago I purchased Additional Pension with the LGPS because at the time my employer was removing itself from the DB scheme and intended to only offer a DC product in the future.  I didn't know whether I would get access to a DB scheme again so I rushed to buy extra guaranteed pension.  I am a fan.

You have to note that LGPS Additional Pension (at least when I did it) buys extra pension for yourself only and no spousal benefits.  When your time is up the Additional Pension stops.

Is your offer good value?  If you have already built up sheds load of DB pension, then why bother?  If you don't have that much DB accrued I would probably be jumping at the chance of additional pension.  Could you get a better offer elsewhere?  Probably not.

How much will you get back in the future?  Don't underestimate the effect of inflation - LGPS has uncapped CPI indexation and it jumped up over 10% a couple of years ago due to high inflation rate.  Over 20-30 timeframe you might see something like that again.

As with everything in life, it depends...