TPS vs LGPS

JollyProfessor

Hi everyone are there any pension geeks out there who know the ins and outs of the Teachers Pension Scheme vs the Local Government Pension Scheme?

I work at Sheffield Hallam University and the management are proposing moving most of us academic staff out of the TPS and into the LGPS.

Are we going to better or worse off in terms of our pensions if we move from TPS to LGPS???

thanks

daveyjp

I'm sure it is straightforwards to compare the benefits for new starters by looking at the scheme information on websites.

The issue with any transfer for existing staff is it will be dependent on the individual circumstances. Age, years of service, pay level, years to retirement etc etc so 'worse off' my not be a simple calculation. Will it be a full transfer to LGPS, or will TPS be deferred and a new LGPS started?

If it were the other way the LGPS has seen some major changes over the last 20 or so years, but existing members have protected and valuable benefits. If TPS has also seen changes knowing how they may be affected by the move is something to understand.

You also need to consider other benefits of each scheme, in particular death in service, survivor pension and AVC options. Some LGPS employers offer salary sacrifice AVCs, which some members may consider a valuable benefit.

huw01

AVCs in the LGPS schemes are the only ones that can ne taken in full as a cash free lump sum

LHW99

Things to consider could include:

Do you have any DB in the TPS?

What are the normal pension ages in your TPS vs the LGPS you would go into?

Can you preserve the TPS benefits and only go into the LGPS from now on, or do you have to transfer everything over and if there's a choice, would one be more flexible / likely give better pension provision?

hugheskevi

A key point is that the TPS has lower accrual but higher in-service revaluation, whereas the LGPS has higher accrual but lower in-service revaluation. In general, that will mean LGPS favours older workers and those who only serve for a short period whilst TPS will favour younger workers who remain in the scheme for many years.

The LGPS AVC arrangements are a very key benefit to explore, given the low lump sum commutation factors used in public service pension schemes (12:1).

You definitely want to keep the enhanced in-service revaluation of the TPS pension, which is protected if you make a club transfer of TPS benefits to LGPS, but the change may involve a different type of transfer. You should make sure you understand how future revaluation of accrued TPS benefits would be calculated whilst you remain in service.

It might be worth asking about protected minimum pension ages, and how they apply to the TPS and LGPS benefits.

jimi_man

It's unlikely to affect you and probably won't feature in the decision making, but it's worth knowing that the TPS is an Unfunded scheme - i.e. Govt funded and the LGPS is a Funded scheme. AFAIK it makes little difference.

Out of the four Public Sector pensions that Mrs J and I have, the LGPS was the second easiest to deal with and it was pretty smooth when she came to take it.

diddyflanker

The TPS is more expensive for most pay scales and you get less added to the pension than the LGPS.

The TPS gets an extra 1.6% added each year, but only if you remain in the TPS. For those with larger CA pensions in the TPS already this would have more of an impact than those who have only just started to build up a pension in the TPS. The lower cost and better accrual rate outweigh this extra 1.6% though for those just starting.

Those who started before April 2015 will have some of their pension in a "final salary" scheme. Moving to the LGPS could result in this not being worked out using future pay increases.

LOWER COST:

At £30,000 the TPS charges 7.4% and the LGPS 6.5%

At £50,000 the TPS charges 9.9% and the LGPS 6.8%

At £80,000 the TPS charges 11.6% and the LGPS 8.5%

BETTER ACCRUAL RATE:

At £30,000 the TPS adds £526 to the pension and the LGPS adds £612

At £50,000 the TPS adds £877 and the LGPS £1020

At £80,000 the TPS adds £1,404 and the LGPS £1,633

hyubh

https://forums.moneysavingexpert.com/discussion/6660134/tps-vs-lgps

As the others have said, the TPS and LGPS are roughly equivalent overall. The respective CARE structures differ so that the TPS is biased towards longer membership where the LGPS isn't, however normal pension ages are the same, pension increases are the same, early and late retirement factors will be very similar, etc.

That said… it seems a rather short-sighted move on the university's part. A crucial difference between the two schemes is that membership of the TPS from the employer's POV is akin to membership of a DC scheme: you pay the contribution rate, and that's basically that. Whereas with the LGPS, you get a pension liability to put on your financial statements and not just a contribution expense. At present employer rates in the TPS may be higher, but only because the LGPS - like most funded DB schemes - is riding the wave of higher interest rates etc. Were that to change, it's perfectly possible that the pension fund (South Yorks in this case) will go back to the university demanding more cash ('deficit payments').

Another aspect that's not quite clear, reading around, is the mechanism involved to have teaching staff in the LGPS. According to the website of the applicable LGPS administering authority (SYPA), the university is a 'scheduled' not 'admitted' body. This would imply those who are eligible for LGPS membership are so simply because they are an employee. However, the press reports say the removal of teaching staff from the TPS will be effected by creating a subsidiary to move them into (some sort of wheeze is needed, since if an employee is eligible for another public service scheme, they are not eligible for the LGPS). On the face of it this would necessitate an admission agreement with SYPA to be arranged. But unless the university agrees to underwrite this new subsidiary's pension liabilities, then I would expect the subsidiary's employer rate to be materially higher than the university's own, to reflect the much weaker covenant. But that would defeat the object of moving staff to the LGPS in the first place…

OK, that's a load of words on my part, but from the employee's POV, I think the bigger concern here is not whether in some respects the LGPS might be a bit worse than the TPS (in others it will be better!). Rather, it's that being a member of a public service DB scheme will become contingent on an admission agreement between the university and the LGPS fund, rather than being a right of employment. Maybe eligibility will be drawn very broadly, however the point is that it will need to be drawn, whereas currently, the university has no choice in who it puts into the TPS.