The SCAPE rate and deciding when to take govt DB

LHW99

They then make an electronic accounting entry showing the loan as an
asset and create a matching deposit out of thin air when they pay the
loan into the borrowers account.

I knew I never understood double entry book-keeping 😖

SnowMan

https://forums.moneysavingexpert.com/discussion/comment/82151362#Comment_82151362

It depends on what the size of the change in the reduction is at different years early.

A 0.5% change in reduction factor (e.g. 30.5% vs 30% reduction) applied to a 10Kpa pension for example is about £50pa. Is that really going to majorly change someone's decision?

Given this is important to you perhaps you can research what the changes are likely to be numerically in terms of the early retirement reduction figures and report back to us. If the new factors aren't available yet, what are the changes for other public sector schemes who have already changed their factors?

michaels

https://forums.moneysavingexpert.com/discussion/comment/82151409#Comment_82151409

Sounds like a simple question but for cs alpha the 1.7% was never applied because they never got around to updating the factor tables and apparently it is the factor tables that matter not the underlying rules.

QrizB

Sounds like a simple question but for cs alpha the 1.7% was never applied because they never got around to updating the factor tables and apparently it is the factor tables that matter not the underlying rules.

I'm not sure where you got that from? Hugheskevi referred specifically to the Alpha actuarial factors in his post on the first page of this thread:

For example, when the discount rate changed from CPI+2.4% to CPI+1.7% the alpha early retirement factor applied to retire at age 60 for someone with a Normal Pension age of 67 changed from a 31.3% reduction to a 30% reduction.

michaels

https://forums.moneysavingexpert.com/discussion/comment/82151611#Comment_82151611

Google AI was very authoritative under repeated questionning - and very wrong - apologies.

Universidad

Ultimately it is all just money washing around the Exchequer that balances to zero - the Treasury grants Departments funds, who then make employer pension contributions back to the Exchequer.

This is true of most of the unfunded public sector pensions, but interestingly not universally so. There are cases where private employers have access to unfunded government schemes, and for them the changes are more financially meaningful, as their contribution rates are not a mere trick of accounting.

hugheskevi

https://forums.moneysavingexpert.com/discussion/comment/82174081#Comment_82174081

Yes, the new Fair Deal employers, who have to pay whatever they are told to the scheme and get their money from contractual payments. In the context of the schemes as a whole they are a very small percentage of membership, but a much larger percentage of total employers as there are a lot of them employing small numbers. Another administrative headache, as these can be employers unfamiliar with meeting their DB administrative obligations.

Although some of them have terms for the services they provide that include the contracting authority (ie the purchaser of the services they provide) bearing the cost or benefit of changes in the pension contribution rate, given that was something outside the control of the Fair Deal employer. In those cases, if the employer contribution rate increases their contractual payments increase to cover the extra payments, and vice-versa, so it is back to the Govt department bearing the risk, who are in turn funded by the Exchequer.

Silvertabby

https://forums.moneysavingexpert.com/discussion/comment/82151317#Comment_82151317

Retired now, but I was a LGPS administrator when the 'pension freedoms' were announced.

These 'freedoms' were only meant to apply to DC schemes, ie extending the drawdown option rather than being limited to an annuity. I'm inclined to suspect that the architects of this scheme never even considered that members of the so-called gold plated public sector pension schemes would even want to be in on this.

But they were wrong. The LGPS were certainly swamped with calls from members who wanted to transfer out, because they had 'read' that they could just transfer the cash equivalent value of their pensions to another 'cash it in now' pension scheme. Or, in some cases, direct to their bank accounts. And the seemingly hundreds of 'Pension Advice' firms that popped up overnight, all keen to tell public sector pensioners that they'd be better off transferring their benefits to a scheme of their choosing, didn't help either.

It was only a matter of time before the unfunded schemes put a stop to this madness. But the LGPS, being funded, had to battle on. We did our best to dissuade people from transferring out to schemes that invested in Cape Verde, storage pods, airport parking, South American teak plantations, etc, but in the very early days (ie, before the much hated requirement for proper IFA advice became compulsary) it was very difficult. If the Pensions Advice firm was registered as such with HMRC then our hands were largely tied.

Had some very interesting conversations with reps from some of these (now long gone) Pensions Advice firms. One even rang me to chase up the transfer value for one of our members, then told me that, under no circumstances, should I send out a copy of the quote with the by then obligatory Scorpion Leaflet to the member, because they were terrified of spiders and scorpions! He was not best pleased when I told him I would doctor a copy of the leaflet, to remove just the picture.