LGPS Early Retirement Wannabe

bioboybill · 4 January 2018 at 1:01PM

Hi all, Some advice/opinions welcomed on my current retirement plans.

I am 55 with 32 years service and contributions to the LGPS. I earn just over £36K per year. My wife is 56. She currently has 18 years contributions to the LGPS, but she took voluntary severance on 31st July 2017, and has no plan to return to work. She takes a pension of £9K a year from a previous employment, which will reduce to about £2400 when she hits SPA at 67, but then her SP will kick in and she will get around £7800 from that. She has deferred her LG pension, as it would be reduced by about 35% for taking it early.

Like many parents our age, we have been the bank of mum and dad the last 10 years getting our son through uni and just recently helping him and his girlfriend buy their first house. We have never been able to save for ourselves until the last year when we managed to save £6K. Now I am thinking it's time to start thinking about us, and after 36 years of work with no breaks already I can't bear the thought of doing this past 60!

We are mortgage free, so that helps a great deal. We live in the North East of England where house prices are relatively low, and we live in a 3 bed semi, so downsizing and moving to a cheaper area isn't an option as part of the plan.

Originally I was thinking of putting £600 a month into the Prudential LGPS AVC, but my wife is particularly risk averse, so I agreed to just put £300 a month in and make the £60 a month tax saving, and save £250 a month in a savings account, so we have a rainy day/house/car pot.

If I work until 60 that then gives me a forecast pension of around £18K a year, a £30K TFLS from LGPS and another £18K +/- profits/losses in the AVC, which I believe I can also take tax free in with my LGPS TFLS. If I am correct, I will have 85 rule protection on my pension accrued up to 31st March 2008?

My plan would be to draw down about £6K a year from my £48K ish TFLS to add to my £18K pension to take me to 67 when my SP kicks in. My wife will continue to take her £9K pension, and possibly pay into a SIPP for the tax advantage. She will defer her LGPS pension as long as possible to minimise the reduction.

Does all of this sound sensible? Have I missed something? I thought I read somewhere that if you deferred like my wife you still accrue service that counts for the 85 rule. So for instance my wife left her job aged 56 with just under 18 years, so doesn't qualify. However, if she defers just over 6 years she will be 62 and have 24 years, so will qualify. Maybe an LGPS expert on here could advise? I know only her 1999-2008 service would be covered, but better than a poke in the eye!

Silvertabby · 4 January 2018 at 1:15PM

If I work until 60 that then gives me a forecast pension of around £18K a year, a £30K TFLS from LGPS and another £18K +/- profits/losses in the AVC, which I believe I can also take tax free in with my LGPS TFLS.

Yes, as long as your automatic lump sum (from your pre 2008 service) plus your AVC is less than 25% of the value of your combined pension/AVC benefits. There have been rumblings that HMRC will put a stop to this tax break, but nothing definite yet.

If I am correct, I will have 85 rule protection on my pension accrued up to 31st March 2008?

Yes

I thought I read somewhere that if you deferred like my wife you still accrue service that counts for the 85 rule. So for instance my wife left her job aged 56 with just under 18 years, so doesn't qualify. However, if she defers just over 6 years she will be 62 and have 24 years, so will qualify. Maybe an LGPS expert on here could advise? I know only her 1999-2008 service would be covered, but better than a poke in the eye!

Yes. Just be careful if your wife, for whatever reason, decides to work/re-join the LGPS - if her benefits are combined, the gap in between won't count towards the Rule of 85.

bioboybill · 4 January 2018 at 2:32PM

Thanks, Silvertabby. Glad my understanding of the 85 rule was correct. &#55357;&#56832;

I would still welcome any opinions as to whether my plan seems reasonable, and whether there may be some things I've missed.

Silvertabby · 4 January 2018 at 2:51PM

Actual advice is outside my remit, I'm afraid. Hopefully someone else will pop up with some ideas.

Moby · 4 January 2018 at 4:58PM

I'm no financial expert but that Pru AVC tax break is very generous imo. You get 20% relief added and can take it all as a tax free lump sum so long as it doesn't amount to more than 25% of your full pension benefits! I'm putting as much as I can into mine!

bioboybill · 4 January 2018 at 7:35PM

Yes, I'm hoping those tax breaks stay, and will look to up contributions further when I can.

lazyred · 4 January 2018 at 11:24PM

Out of interest why did your wife get VS instead of VER? I thought you could draw the LGPS without reduction after redundancy over 55.

OldBeanz · 4 January 2018 at 11:34PM

Your wife is earning less than her tax free allowance so you can either transfer £1k of her allowance to her or pay £2880 into a SIPP then withdraw £3600 each year after the Government has added in 25%.

bioboybill · 5 January 2018 at 11:41AM

lazyred wrote: »

Out of interest why did your wife get VS instead of VER? I thought you could draw the LGPS without reduction after redundancy over 55.

Yes, according to the rules you are correct, and I pointed that out to my union at the time. However, what our employer did was that they asked those applying whether they would accept the deal with a reduced pension, or whether they wanted payment of an unreduced pension. They made it clear that if the extra cost of an unreduced pension was more than the severance payment you would be refused. Hence my wife accepted the severance on the basis of a reduced pension and was allowed to go. Everybody asking for the unreduced pension they were entitled to was told they were "critical to the business" and refused.

bioboybill · 5 January 2018 at 11:43AM

OldBeanz wrote: »

Your wife is earning less than her tax free allowance so you can either transfer £1k of her allowance to her or pay £2880 into a SIPP then withdraw £3600 each year after the Government has added in 25%.

Yes, that's part of my plan.

Silvertabby · 5 January 2018 at 12:46PM

“ Out of interest why did your wife get VS instead of VER? I thought you could draw the LGPS without reduction after redundancy over 55.
Originally posted by lazyred ”

Yes, according to the rules you are correct, and I pointed that out to my union at the time. However, what our employer did was that they asked those applying whether they would accept the deal with a reduced pension, or whether they wanted payment of an unreduced pension. They made it clear that if the extra cost of an unreduced pension was more than the severance payment you would be refused. Hence my wife accepted the severance on the basis of a reduced pension and was allowed to go. Everybody asking for the unreduced pension they were entitled to was told they were "critical to the business" and refused. Posted by Bioboybill

This was becoming more common as at the time I retired a couple of years ago.

The employer costs due in respect of an unreduced pension at 55 (bearing in mind that OP's wife wouldn't have any R85 protections then as 55 + 18 = 73) would have been very substantial.

LGPS Early Retirement Wannabe

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