Aggregating earlier LGPS Benifits

Maisey98 · 15 April 2018 at 10:15PM

Hi, hopefully this is a fairly easy query, but I would appreciate some advice on whether or not to aggregate my pensions.

I am currently working for local government, and I have deferred benefits from a previous LGPS membership 1986-96 with a current Retirement Pension of £2448 and a Retirement Grant of £7345 payable when I'm 60 (currently 50) - I assume that the grant is a lump sum payment ?

As I have greater than a 5 year gap, I only have the option of aggregating on an earned pension basis, where I would be awarded a Earned Pension of £3810 payable at State Pension Age (67).

My initial thoughts are not to aggregate as I can take my deferred benefits pension at 60 and whilst the earned pension is higher it does not come in to play until I'm 67. My rough calcs seem to show that I would need to reach an age of 84 before the increase in earned pension caught up with the earlier paying deferred benefits ?

I believe the only negative from not combining is the reduced pension if I were to leave my current employment due to ill health or redundancy ?

Any advice greatly appreciated.

Silvertabby · 16 April 2018 at 10:44AM

You've got a pretty good handle on it, Maisie.

The easiest way to compare the two pension options would be to convert them both to show the maximum 25% tax free lump sum conversion. So,

£2448 pension plus £7345.00 lump sum or £1967.20 pension plus £13,114.64 lump sum at age 60.

£3810 pension or £2449 pension plus £16,328.57 lump sum at 67.
Or, if taken at 60, £3810 pension - 30% early retirement reduction = £2667.
Commutation = £1714.50 plus £11430.00 lump sum.

Possibly not as much of a difference as you may have thought? Of course, if you do combine then you won't have the option of taking these benefits at 60 while you carry on working full time (flexible retirement is another matter!).

So, leave separate if you know that you would take this little pension at 60, or combine if you think that you may be made redundant (or retire) after age 55 but before age 60.

Ill health benefits are paid regardless of age, and so if the worse were to happen you would have access to both pensions combined or not.

Maisey98 · 16 April 2018 at 11:39AM

Hi Silvertabby, That's some great information that helps me with my decision - Thanks.

On the ill heath front are you saying that the deferred benefits from a previous LG employment would be payable if I had to cease work due to ill heath in my current LG employment, although there is a gap of nearly 20 years between the two employments ?

Silvertabby · 16 April 2018 at 11:50AM

Maisey98 wrote: »

Hi Silvertabby, That's some great information that helps me with my decision - Thanks.

On the ill heath front are you saying that the deferred benefits from a previous LG employment would be payable if I had to cease work due to ill heath in my current LG employment, although there is a gap of nearly 20 years between the two employments ?

Yes, although you would have to apply through (and be approved by) both employers/Local Authorities. In the case of your deferred pension, that would be paid without any ill health enhancements, but on the other hand it wouldn't be actuarily reduced for early payment. However, your current pension would be enhanced (assuming Tier 1 or 2).

Any difference between combining/not combining would be down to the fact that if you did combine and were then ill-health retired the higher pension you would have been given on transfer wouldn't be reduced for early payment.

It's real crystal ball stuff, I'm afraid !

Aggregating earlier LGPS Benifits

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