So confused... planning to retire at 67, redundancy means I have to take my LGPS pension at 58

BrilliantButScary

letsomebodyloveyou said:

BrilliantButScary said:

daveyjp said:

I wouldn't worry about strain costs and how numbers are calculated or breaking even.  It makes no difference to your payment.

At 58 you could be receiving  this pension income for 40 years.  A £40k sum is tempting, but will need continual management to beat inflation over such a length of time.

The £10k a year is guaranteed to increase with inflation with no ongoing management or costs to achieve that and considering you only have 7 years service it is one hell of a deal.  Someone in LGPS who isn't made redundant would need many many years service to retire at 58 and achieve £10k a year due to the significant deductions for early retirement, something you aren't subject to.

I think you should 'snatch their hand off' at £10k per annum! You will not be paying NI contributions or pension contributions on this, so it is worth a lot more.

Increases in the LGPS pension, based on CPI, were
9.1 % in 2022 and 7.3% in 2023, therefore faring a lot better than salary increases. 

As another poster stated, you could find another job at £10k less than your current salary and still be quids in.

I would recommend that you check your state pension forecast, to see if you are already eligible for a full state pension.

Thanks @BrilliantButScary - annual salary increases have been pretty much non-existent working in schools for the last 22 years. I have worked since I was 16, apart from a brief maternity break, so I think I am on track for the full state pension, but will double check. I will snatch away, thank you  

Come back to the forum, if you have any queries about your state pension forecast.

You may also find the following forum helpful:

https://forums.moneysavingexpert.com/categories/over-50s-money-saving

Change can be both scary and exciting!
Sometimes change forced upon us can be a good thing, after we have got over the initial feelings of shock/anger/loss etc

Best of luck, wherever life takes you.

MarlowMallard

Silvertabby said: 

Under redundancy, the pension accrued to the last day of service is paid without any actuarial reductions.  It is NOT enhanced to what it would have been had the fund member carried on working/contributing to the scheme until normal retirement age.  The times I have had this conversation.....

In this case, and using figures for example only...

(A) Works/contributes to NRA/age 67
Pension payable  = £15K per year  

(B) Worked/contributed to age 58, then left on normal/voluntary retirement.
Pension accrued = £10K per year
£10K minus early payment reduction of £4k
Pension payable = £6K per year ,, plus whatever they accrue in future. 

(C) Worked to age 58, then resigned, did something else, and deferred pension until 67. 
  Pension = £10k per year from 67 , plus whatever they accrue in future. 

(D) Worked/contributed to age 58, then made redundant.
Pension accrued = £10K.
Pension payable (without early payment reductions) = £10K per year, plus whatever they accrue in future. 

 Up here I've edited Silvertabby's nice example a bit, and added in a new person (C) who deferred the pension.  Now you can see that you (D) are £4k per year better off than (B) for life, and about £90k lump-sum better off than (C) because you've had the £10k pa for an extra 9 years.  So it's a pretty decent gain.  You may or may not be better off than (A) depending what you accrue from now to 67. 

hyubh

Marcon said:

letsomebodyloveyou said:

Marcon said:

letsomebodyloveyou said:

Hi, I am being made redundant on 31 Aug at 58 years old. I had no intention of retiring as I simply cannot afford to. I have only been part of the LGPS for 7 years, no other pension. Apparently I have to start taking my pension, and therefore have to choose between the max conversion option of a lump sum and reduced annual pension, or take the standard unreduced annual pension (no lump sum). Neither amount is enough to live on, so I will have to find another job anyway.

I thought it would just mean finding another job, but the whole 'having to start taking my pension early' has thrown me as I was banking on that pension for when I actually planned to retire at 67. I am aware that I will have to pay tax on my annual pension when I get another job. The MoneyHelper site doesn't seem to help with what I understand is a defined benefit CARE pension.

My question is... am I better off taking the estimated reduced annual pension of £6k and investing the £40k lump sum now, or opting for the greater annual pension of £10k? It is only that high as my employer is putting an extra amount in due to making me redundant before my usual retirement age. My £3k redundancy will keep me off the streets for a little while until I find a new job. 

My limited understanding calculations suggest a break even with these two options at age 70, so if I live longer than 70 I am better off not taking a lump sum. Is that too simplistic?

Apologies if the answer is obvious - it is not obvious to me. Thank you for any thoughts  

Have you recognised the huge benefit that your LGPS pension is being early (ie before the scheme's Normal Retirement Age) without any reduction for early payment? Most people would give their eye teeth for that sort of golden goodbye from a job.

You say you were 'banking on that pension for ...when you retire at 67' but the pension is still going to be there in its entirety - it isn't a defined contribution scheme, where taking cash out early depletes the pension pot. Once you begin to draw the LGPS pension, it will increase each year, so I think there's a bit of confusion somewhere.

Sorry @Marcon I missed this bit. A lot of confusion my end Are you saying the amount of pension I will get each year between now and 67 is made up from the extra amount my employer is putting in, and that the actual amount I have already built up in my pension will not have reduced by me having to take my pension early? 

Just checking that the pile of answers you've had in the last couple of hours have now answered this fully and in a way you can understand, despite your current distress?

If the penny has dropped, you'd have realised that the title to your thread should in fact read:

...redundancy means I have can to take my LGPS pension at 58 without reduction for early payment

An aside, but isn't correct, it was changed to 'have to' when the CARE scheme came in. The previous 'can' situation was too much of a pain to administer (the 'strain charge' would still need to be calculated, with the implication the employer still needed to cough up regardless of the soon to be ex-employee's decision).

Marcon

hyubh said:

Marcon said:

letsomebodyloveyou said:

Marcon said:

letsomebodyloveyou said:

Hi, I am being made redundant on 31 Aug at 58 years old. I had no intention of retiring as I simply cannot afford to. I have only been part of the LGPS for 7 years, no other pension. Apparently I have to start taking my pension, and therefore have to choose between the max conversion option of a lump sum and reduced annual pension, or take the standard unreduced annual pension (no lump sum). Neither amount is enough to live on, so I will have to find another job anyway.

I thought it would just mean finding another job, but the whole 'having to start taking my pension early' has thrown me as I was banking on that pension for when I actually planned to retire at 67. I am aware that I will have to pay tax on my annual pension when I get another job. The MoneyHelper site doesn't seem to help with what I understand is a defined benefit CARE pension.

My question is... am I better off taking the estimated reduced annual pension of £6k and investing the £40k lump sum now, or opting for the greater annual pension of £10k? It is only that high as my employer is putting an extra amount in due to making me redundant before my usual retirement age. My £3k redundancy will keep me off the streets for a little while until I find a new job. 

My limited understanding calculations suggest a break even with these two options at age 70, so if I live longer than 70 I am better off not taking a lump sum. Is that too simplistic?

Apologies if the answer is obvious - it is not obvious to me. Thank you for any thoughts  

Have you recognised the huge benefit that your LGPS pension is being early (ie before the scheme's Normal Retirement Age) without any reduction for early payment? Most people would give their eye teeth for that sort of golden goodbye from a job.

You say you were 'banking on that pension for ...when you retire at 67' but the pension is still going to be there in its entirety - it isn't a defined contribution scheme, where taking cash out early depletes the pension pot. Once you begin to draw the LGPS pension, it will increase each year, so I think there's a bit of confusion somewhere.

Sorry @Marcon I missed this bit. A lot of confusion my end Are you saying the amount of pension I will get each year between now and 67 is made up from the extra amount my employer is putting in, and that the actual amount I have already built up in my pension will not have reduced by me having to take my pension early? 

Just checking that the pile of answers you've had in the last couple of hours have now answered this fully and in a way you can understand, despite your current distress?

If the penny has dropped, you'd have realised that the title to your thread should in fact read:

...redundancy means I have can to take my LGPS pension at 58 without reduction for early payment

An aside, but isn't correct, it was changed to 'have to' when the CARE scheme came in. The previous 'can' situation was too much of a pain to administer (the 'strain charge' would still need to be calculated, with the implication the employer still needed to cough up regardless of the soon to be ex-employee's decision).

You can't force someone to start taking a pension - for instance, just don't give your bank details.There's an excellent example of how to frustrate it by doing just that: https://forums.moneysavingexpert.com/discussion/comment/81484653#Comment_81484653?utm_source=community-search&utm_medium=organic-search&utm_term=catinthemoon

MarlowMallard

Marcon said:

You can't force someone to start taking a pension - for instance, just don't give your bank details.There's an excellent example of how to frustrate it by doing just that: https://forums.moneysavingexpert.com/discussion/comment/81484653#Comment_81484653?utm_source=community-search&utm_medium=organic-search&utm_term=catinthemoon

No you can't force them. But if the deferred pension just increases with inflation in the usual way, and there is no uplift for deferring (as seems to be the case here), then not taking the pension is equivalent to gifting the income back to the pension fund, so effectively they are forced. 

Lemon_dr1zzle

Marcon said:

hyubh said:

Marcon said:

letsomebodyloveyou said:

Marcon said:

letsomebodyloveyou said:

Hi, I am being made redundant on 31 Aug at 58 years old. I had no intention of retiring as I simply cannot afford to. I have only been part of the LGPS for 7 years, no other pension. Apparently I have to start taking my pension, and therefore have to choose between the max conversion option of a lump sum and reduced annual pension, or take the standard unreduced annual pension (no lump sum). Neither amount is enough to live on, so I will have to find another job anyway.

I thought it would just mean finding another job, but the whole 'having to start taking my pension early' has thrown me as I was banking on that pension for when I actually planned to retire at 67. I am aware that I will have to pay tax on my annual pension when I get another job. The MoneyHelper site doesn't seem to help with what I understand is a defined benefit CARE pension.

My question is... am I better off taking the estimated reduced annual pension of £6k and investing the £40k lump sum now, or opting for the greater annual pension of £10k? It is only that high as my employer is putting an extra amount in due to making me redundant before my usual retirement age. My £3k redundancy will keep me off the streets for a little while until I find a new job. 

My limited understanding calculations suggest a break even with these two options at age 70, so if I live longer than 70 I am better off not taking a lump sum. Is that too simplistic?

Apologies if the answer is obvious - it is not obvious to me. Thank you for any thoughts  

Have you recognised the huge benefit that your LGPS pension is being early (ie before the scheme's Normal Retirement Age) without any reduction for early payment? Most people would give their eye teeth for that sort of golden goodbye from a job.

You say you were 'banking on that pension for ...when you retire at 67' but the pension is still going to be there in its entirety - it isn't a defined contribution scheme, where taking cash out early depletes the pension pot. Once you begin to draw the LGPS pension, it will increase each year, so I think there's a bit of confusion somewhere.

Sorry @Marcon I missed this bit. A lot of confusion my end Are you saying the amount of pension I will get each year between now and 67 is made up from the extra amount my employer is putting in, and that the actual amount I have already built up in my pension will not have reduced by me having to take my pension early? 

Just checking that the pile of answers you've had in the last couple of hours have now answered this fully and in a way you can understand, despite your current distress?

If the penny has dropped, you'd have realised that the title to your thread should in fact read:

...redundancy means I have can to take my LGPS pension at 58 without reduction for early payment

An aside, but isn't correct, it was changed to 'have to' when the CARE scheme came in. The previous 'can' situation was too much of a pain to administer (the 'strain charge' would still need to be calculated, with the implication the employer still needed to cough up regardless of the soon to be ex-employee's decision).

You can't force someone to start taking a pension - for instance, just don't give your bank details.There's an excellent example of how to frustrate it by doing just that: https://forums.moneysavingexpert.com/discussion/comment/81484653#Comment_81484653?utm_source=community-search&utm_medium=organic-search&utm_term=catinthemoon

No the scheme can’t force the member to complete their forms but if that person ever wanted that pension paid in the future they would get it backdated to the date of redundancy and all the arrears paid at once. 

Marcon

Lemon_dr1zzle said:

Marcon said:

hyubh said:

Marcon said:

letsomebodyloveyou said:

Marcon said:

letsomebodyloveyou said:

Hi, I am being made redundant on 31 Aug at 58 years old. I had no intention of retiring as I simply cannot afford to. I have only been part of the LGPS for 7 years, no other pension. Apparently I have to start taking my pension, and therefore have to choose between the max conversion option of a lump sum and reduced annual pension, or take the standard unreduced annual pension (no lump sum). Neither amount is enough to live on, so I will have to find another job anyway.

I thought it would just mean finding another job, but the whole 'having to start taking my pension early' has thrown me as I was banking on that pension for when I actually planned to retire at 67. I am aware that I will have to pay tax on my annual pension when I get another job. The MoneyHelper site doesn't seem to help with what I understand is a defined benefit CARE pension.

My question is... am I better off taking the estimated reduced annual pension of £6k and investing the £40k lump sum now, or opting for the greater annual pension of £10k? It is only that high as my employer is putting an extra amount in due to making me redundant before my usual retirement age. My £3k redundancy will keep me off the streets for a little while until I find a new job. 

My limited understanding calculations suggest a break even with these two options at age 70, so if I live longer than 70 I am better off not taking a lump sum. Is that too simplistic?

Apologies if the answer is obvious - it is not obvious to me. Thank you for any thoughts  

Have you recognised the huge benefit that your LGPS pension is being early (ie before the scheme's Normal Retirement Age) without any reduction for early payment? Most people would give their eye teeth for that sort of golden goodbye from a job.

You say you were 'banking on that pension for ...when you retire at 67' but the pension is still going to be there in its entirety - it isn't a defined contribution scheme, where taking cash out early depletes the pension pot. Once you begin to draw the LGPS pension, it will increase each year, so I think there's a bit of confusion somewhere.

Sorry @Marcon I missed this bit. A lot of confusion my end Are you saying the amount of pension I will get each year between now and 67 is made up from the extra amount my employer is putting in, and that the actual amount I have already built up in my pension will not have reduced by me having to take my pension early? 

Just checking that the pile of answers you've had in the last couple of hours have now answered this fully and in a way you can understand, despite your current distress?

If the penny has dropped, you'd have realised that the title to your thread should in fact read:

...redundancy means I have can to take my LGPS pension at 58 without reduction for early payment

An aside, but isn't correct, it was changed to 'have to' when the CARE scheme came in. The previous 'can' situation was too much of a pain to administer (the 'strain charge' would still need to be calculated, with the implication the employer still needed to cough up regardless of the soon to be ex-employee's decision).

You can't force someone to start taking a pension - for instance, just don't give your bank details.There's an excellent example of how to frustrate it by doing just that: https://forums.moneysavingexpert.com/discussion/comment/81484653#Comment_81484653?utm_source=community-search&utm_medium=organic-search&utm_term=catinthemoon

No the scheme can’t force the member to complete their forms but if that person ever wanted that pension paid in the future they would get it backdated to the date of redundancy and all the arrears paid at once. 

Many thanks for confirming. I thought the suggestion that otherwise it was the 'equivalent to gifting the income back to the pension fund' was wide of the mark!

hyubh

Marcon said:

hyubh said:

Marcon said:

letsomebodyloveyou said:

Marcon said:

letsomebodyloveyou said:

Hi, I am being made redundant on 31 Aug at 58 years old. I had no intention of retiring as I simply cannot afford to. I have only been part of the LGPS for 7 years, no other pension. Apparently I have to start taking my pension, and therefore have to choose between the max conversion option of a lump sum and reduced annual pension, or take the standard unreduced annual pension (no lump sum). Neither amount is enough to live on, so I will have to find another job anyway.

I thought it would just mean finding another job, but the whole 'having to start taking my pension early' has thrown me as I was banking on that pension for when I actually planned to retire at 67. I am aware that I will have to pay tax on my annual pension when I get another job. The MoneyHelper site doesn't seem to help with what I understand is a defined benefit CARE pension.

My question is... am I better off taking the estimated reduced annual pension of £6k and investing the £40k lump sum now, or opting for the greater annual pension of £10k? It is only that high as my employer is putting an extra amount in due to making me redundant before my usual retirement age. My £3k redundancy will keep me off the streets for a little while until I find a new job. 

My limited understanding calculations suggest a break even with these two options at age 70, so if I live longer than 70 I am better off not taking a lump sum. Is that too simplistic?

Apologies if the answer is obvious - it is not obvious to me. Thank you for any thoughts  

Have you recognised the huge benefit that your LGPS pension is being early (ie before the scheme's Normal Retirement Age) without any reduction for early payment? Most people would give their eye teeth for that sort of golden goodbye from a job.

You say you were 'banking on that pension for ...when you retire at 67' but the pension is still going to be there in its entirety - it isn't a defined contribution scheme, where taking cash out early depletes the pension pot. Once you begin to draw the LGPS pension, it will increase each year, so I think there's a bit of confusion somewhere.

Sorry @Marcon I missed this bit. A lot of confusion my end Are you saying the amount of pension I will get each year between now and 67 is made up from the extra amount my employer is putting in, and that the actual amount I have already built up in my pension will not have reduced by me having to take my pension early? 

Just checking that the pile of answers you've had in the last couple of hours have now answered this fully and in a way you can understand, despite your current distress?

If the penny has dropped, you'd have realised that the title to your thread should in fact read:

...redundancy means I have can to take my LGPS pension at 58 without reduction for early payment

An aside, but isn't correct, it was changed to 'have to' when the CARE scheme came in. The previous 'can' situation was too much of a pain to administer (the 'strain charge' would still need to be calculated, with the implication the employer still needed to cough up regardless of the soon to be ex-employee's decision).

You can't force someone to start taking a pension - for instance, just don't give your bank details.There's an excellent example of how to frustrate it by doing just that: https://forums.moneysavingexpert.com/discussion/comment/81484653#Comment_81484653?utm_source=community-search&utm_medium=organic-search&utm_term=catinthemoon

I'm not sure what you are trying to argue, there was a clear change in the 2014 regs. From the scheme administrator's POV the pension is due on redundancy.

Marcon

I'm not 'arguing' anything. I simply pointed out that you can't force someone to start taking their pension.

Silvertabby

Marcon said:

I'm not 'arguing' anything. I simply pointed out that you can't force someone to start taking their pension.

Never known this happen with ill health or redundancy benefits, but a not unrare problem with deferred benefits due payment at 60 (old R85 records).  Those who did respond made it quite clear that they didn't want their LGPS pension because it was less than the means tested benefits they would have to forfeit.  Without bank details there was nothing we could do.