LGPS transfer in value?
Comments
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Using 'the rule of 72' the £125k would roughly double in under 30 years if I can achieve investment growth of 2.5% above inflation and fees which would give £250k.
With 16 years between 68 and life expectancy of 84 then £250k/16 is just over £15k per year.
As such it doesn't seem the transfer would be any more advantageous than just letting the investments run forward?
Other than the guaranteed income, at the cost of flexibility and that my wife is younger so likely to outlive me.
Alex0 -
Using 'the rule of 72' the £125k would roughly double in under 30 years if I can achieve investment growth of 2.5% above inflation and fees which would give £250k.
With 16 years between 68 and life expectancy of 84 then £250k/16 is just over £15k per year.
As such it doesn't seem the transfer would be any more advantageous than just letting the investments run forward?
Alex
Investments aren't my bag, I'm afraid - all of our pensions (nearly 80 years between us) are public sector DB schemes, so we've never had to worry about the up and downs of the stock market. Whatever you go for, I do hope it works out for you.0 -
Having spent all my time in the private sector and with investment risk being normal this is all a bit alien to me too. Still I fancy doing something new.0
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I've just read this again - and you seem to be saying that there may not be any difference between:!!!8220; Using 'the rule of 72' the £125k would roughly double in under 30 years if I can achieve investment growth of 2.5% above inflation and fees which would give £250k.
With 16 years between 68 and life expectancy of 84 then £250k/16 is just over £15k per year.
As such it doesn't seem the transfer would be any more advantageous than just letting the investments run forward?
Alex
Originally posted by Alexland
Using £125K to buy £15K of LGPS pension now (payable at 68)
and..
Investing £125K to return £250K at 68, which will provide £15K of income for 16 years.
But you haven't taken into account the index linking of the bought pension. I'm not going to even try to guess CPI for the next 28 years (40 to 68), but a quick number crunch using 2% per year raises that £15K now to just over £26K per year at 68.......0 -
Silvertabby wrote: »But you haven't taken into account the index linking of the bought pension. I'm not going to even try to guess CPI for the next 28 years (40 to 68), but a quick number crunch using 2% per year raises that £15K now to just over £26K per year at 68.......
I think I have as my 2.5% was above inflation and fees - say 5% investment return minus 2% inflation and 0.5% fees. So I would expect the £125k to grow significantly higher than £250k but only be worth £250k in today's spending power.
Alex0 -
“ But you haven't taken into account the index linking of the bought pension. I'm not going to even try to guess CPI for the next 28 years (40 to 68), but a quick number crunch using 2% per year raises that £15K now to just over £26K per year at 68.......
Originally posted by SilvertabbyI think I have as my 2.5% was above inflation and fees - say 5% investment return minus 2% inflation and 0.5% fees. So I would expect the £125k to grow significantly higher than £250k but only be worth £250k in today's spending power.
Alex
Fair do's - but I'm glad we've got the pensions we have !0 -
Does LGPS have a system for buying additional years of pension as you roll along? If so it might be more tax efficient to use that and to keep the current pensions separate for funding early retirement.
On the other hand if you don't expect to be in LGPS for many years it might be attractive to transfer now and build up a new DC pension later.Free the dunston one next time too.0 -
Sounds fair but not overly generous compared to my anticipated investment performance.
The generous part is that it's guaranteed for life. Forecasting 30 years hence is worthless. Better to set objectives in a phased manner. Mine was first to secure a base income. From that point onwards taking additional risk didn't give me sleepness nights.0 -
Does LGPS have a system for buying additional years of pension as you roll along? If so it might be more tax efficient to use that and to keep the current pensions separate for funding early retirement.
Not sure but I am starting to wonder how much additional money we really need pension wrapped going forward.
An alternative might be to convert £200k into £25k pa then accept the 40% reduction to £15k pa for getting access 10 years early. Then the remaining £50k money purchase pot would grow to cover the 10 years of missing SP plus maybe a TFLS. So that would give an income of £8.5k plus £15k = £23.5k pa from age 58 which would more than cover our current annual spending. Plus that would grow a bit with each year's service and avoid needing to draw upon my younger wife's pensions (other than for tax efficient recycling).
Alex0 -
Transferring some into an DB pension can be good if you believe you'll one day exceed the LTA. However when you aren't near retirement age that involves speculation about your future pension value and the future LTA value.
The lgps does offer some under retirement age benefits like the death in service lump sum, ill health retirement, pension for partner and spouse even if you die young, etc.
It's not an easy choice though. You could transfer in less and just have that and what you build up from your future service.Don't listen to me, I'm no expert!0
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