LGPS Trivial Commutation Help Wanted

Truro_Paul

Hello, everyone has always been so helpful on here in the past and so posting a request for a friend.

They are 59 and worked for a few years in a school and so have a Deferred LGPS pension with a transferable value of just under £24,000. They decided to request the full amount as a lump sum under the trivial commutation rules and have no other LGPS or private pensions.

Their understanding is that the pension value is under £30,000 and so qualifies but they have received a latter stating the capital value of their pension exceeds £30,000 (but they can retire and take a smaller lump sum of approx £4,000 and then £650 per annum). 

For those who understand trivial commutation rules does this seem correct? The £24,000 is the only total they can see in the information provided on the pension website. 

Thank you in advance for any help and advice. 

SVaz

Is the £24k valuation from a recent CETV request?
If so then where does the over £30k bit come from?

My Wife did a smaller LGPS transfer a few years back and the CETV was valid for 6 months I think, it took ages

If the CETV is over £30k then they will need paid advice on the transfer afaik. 

Marcon

It's the capital value which matters, so yes - the scheme is correct.

Silvertabby

The capital value for trivial commutation purposes is not the same as the CETV figure.

The actual trivial commutation is calculated using age related factors for both the member and spousal benefits, plus any automatic lump sum.  But the starting eligibility check calculation is a simple 20 X annual pension plus 1 X any automatic lump sum (from pre 2008 service).

That said, the figures you have quoted aren't adding up.  An annual pension of £650 plus lump sum of £4000 = a notional capital value of £17K.  Nowhere near £30K - and nowhere near the quoted CETV of £24K.  (LGPS transfer factors are set by GAD and are notoriously poor).

Truro_Paul

SVaz said:

Is the £24k valuation from a recent CETV request?
If so then where does the over £30k bit come from?

My Wife did a smaller LGPS transfer a few years back and the CETV was valid for 6 months I think, it took ages

If the CETV is over £30k then they will need paid advice on the transfer afaik. 

No CETV request, the letter they received when they first enquired about a trivial commutation gave a value of just under £24,000 and this is also the amount shown under Financial History on the website.

Truro_Paul

Marcon said:

It's the capital value which matters, so yes - the scheme is correct.

Thanks, how would you find out what the capital value is? There were no further details in the letter

Truro_Paul

Silvertabby said:

The capital value for trivial commutation purposes is not the same as the CETV figure.

The actual trivial commutation is calculated using age related factors for both the member and spousal benefits, plus any automatic lump sum.  But the starting eligibility check calculation is a simple 20 X annual pension plus 1 X any automatic lump sum (from pre 2008 service).

That said, the figures you have quoted aren't adding up.  An annual pension of £650 plus lump sum of £4000 = a notional capital value of £17K.  Nowhere near £30K - and nowhere near the quoted CETV of £24K.  (LGPS transfer factors are set by GAD and are notoriously poor).

Thanks, I will text them and ask for specific figures, thank you.

Truro_Paul

Silvertabby said:

The capital value for trivial commutation purposes is not the same as the CETV figure.

The actual trivial commutation is calculated using age related factors for both the member and spousal benefits, plus any automatic lump sum.  But the starting eligibility check calculation is a simple 20 X annual pension plus 1 X any automatic lump sum (from pre 2008 service).

That said, the figures you have quoted aren't adding up.  An annual pension of £650 plus lump sum of £4000 = a notional capital value of £17K.  Nowhere near £30K - and nowhere near the quoted CETV of £24K.  (LGPS transfer factors are set by GAD and are notoriously poor).

Okay, so more exact details:

Age is 57 not 59

The chose a retirement quote to retire immediately (20th). The LGPS were very prompt and letter received a few days later.

The pension: £954.34 per annun

Or

Lump sum: £4089 plus £614 per annum

Or

Lump sum of £23682

The total of all their pension contributions totals the lump sum above.

They chose the option of the lower lump sum on the form if the trivial commutation was not possible and this is now in progress.

They do also have just £1200.00 sitting in an old private pension that they accessed in 2023 and have not got around to closing. 

Thanks again for any help

Silvertabby

Truro_Paul said:

Silvertabby said:

The capital value for trivial commutation purposes is not the same as the CETV figure.

The actual trivial commutation is calculated using age related factors for both the member and spousal benefits, plus any automatic lump sum.  But the starting eligibility check calculation is a simple 20 X annual pension plus 1 X any automatic lump sum (from pre 2008 service).

That said, the figures you have quoted aren't adding up.  An annual pension of £650 plus lump sum of £4000 = a notional capital value of £17K.  Nowhere near £30K - and nowhere near the quoted CETV of £24K.  (LGPS transfer factors are set by GAD and are notoriously poor).

Okay, so more exact details:

Age is 57 not 59

The chose a retirement quote to retire immediately (20th). The LGPS were very prompt and letter received a few days later.

The pension: £954.34 per annun

Or

Lump sum: £4089 plus £614 per annum

Or

Lump sum of £23682

The total of all their pension contributions totals the lump sum above.

They chose the option of the lower lump sum on the form if the trivial commutation was not possible and this is now in progress.

They do also have just £1200.00 sitting in an old private pension that they accessed in 2023 and have not got around to closing. 

Thanks again for any help

You are both very welcome.

Just to clarify - pension contributions aren't linked to any of these quoted figures, which are calculated on salary and service.  That said, If your friend HAD paid in £23,683 in personal contributions, then I would have expected her pension benefits to be much higher than they are.  Is she looking at some other figures?

Truro_Paul

Silvertabby said:

Truro_Paul said:

Silvertabby said:

The capital value for trivial commutation purposes is not the same as the CETV figure.

The actual trivial commutation is calculated using age related factors for both the member and spousal benefits, plus any automatic lump sum.  But the starting eligibility check calculation is a simple 20 X annual pension plus 1 X any automatic lump sum (from pre 2008 service).

That said, the figures you have quoted aren't adding up.  An annual pension of £650 plus lump sum of £4000 = a notional capital value of £17K.  Nowhere near £30K - and nowhere near the quoted CETV of £24K.  (LGPS transfer factors are set by GAD and are notoriously poor).

Okay, so more exact details:

Age is 57 not 59

The chose a retirement quote to retire immediately (20th). The LGPS were very prompt and letter received a few days later.

The pension: £954.34 per annun

Or

Lump sum: £4089 plus £614 per annum

Or

Lump sum of £23682

The total of all their pension contributions totals the lump sum above.

They chose the option of the lower lump sum on the form if the trivial commutation was not possible and this is now in progress.

They do also have just £1200.00 sitting in an old private pension that they accessed in 2023 and have not got around to closing. 

Thanks again for any help

You are both very welcome.

Just to clarify - pension contributions aren't linked to any of these quoted figures, which are calculated on salary and service.  That said, If your friend HAD paid in £23,683 in personal contributions, then I would have expected her pension benefits to be much higher than they are.  Is she looking at some other figures?

Ah, so is it reasonable to assume that the true value of the pension with inflation and investment is somewhat higher than the amount that would be paid out as a lump sum under the trivial commutation rules and that they forfeit this by taking the pension earlier? 

Apparently since the retirement was processed there is less information on the website than there was before 

Silvertabby

Truro_Paul said:

Silvertabby said:

Truro_Paul said:

Silvertabby said:

The capital value for trivial commutation purposes is not the same as the CETV figure.

The actual trivial commutation is calculated using age related factors for both the member and spousal benefits, plus any automatic lump sum.  But the starting eligibility check calculation is a simple 20 X annual pension plus 1 X any automatic lump sum (from pre 2008 service).

That said, the figures you have quoted aren't adding up.  An annual pension of £650 plus lump sum of £4000 = a notional capital value of £17K.  Nowhere near £30K - and nowhere near the quoted CETV of £24K.  (LGPS transfer factors are set by GAD and are notoriously poor).

Okay, so more exact details:

Age is 57 not 59

The chose a retirement quote to retire immediately (20th). The LGPS were very prompt and letter received a few days later.

The pension: £954.34 per annun

Or

Lump sum: £4089 plus £614 per annum

Or

Lump sum of £23682

The total of all their pension contributions totals the lump sum above.

They chose the option of the lower lump sum on the form if the trivial commutation was not possible and this is now in progress.

They do also have just £1200.00 sitting in an old private pension that they accessed in 2023 and have not got around to closing. 

Thanks again for any help

You are both very welcome.

Just to clarify - pension contributions aren't linked to any of these quoted figures, which are calculated on salary and service.  That said, If your friend HAD paid in £23,683 in personal contributions, then I would have expected her pension benefits to be much higher than they are.  Is she looking at some other figures?

Ah, so is it reasonable to assume that the true value of the pension with inflation and investment is somewhat higher than the amount that would be paid out as a lump sum under the trivial commutation rules and that they forfeit this by taking the pension earlier? 

Apparently since the retirement was processed there is less information on the website than there was before 

Yes - trivial commutation factors are age related. 

In your friend's case, by taking her benefits early (before 65/SPA) her pension will have been reduced for early payment.  And then further reduced by taking the maximum tax free lump sum by the very poor commutation factor of 1:12 (gave up £1 of fully index linked pension for life for a one-off tax free lump sum of £12).  But what's done is done.