Any advice e for pension newbie?

Brett72 · 5 July 2017 at 10:31PM

Hi. Extreme newbie here wanting some/any pension advice. Kind of a what would you do situation. Very small fry compared to some posts on here.
Back story is – was in a works pension until getting made redundant. Took some as cash – which has helped recently with getting a good – for me – deal with my mortgage (reduced payments, 10 year low rate) and the rest I used to buy years into my LGPS.
Realised recently that my pension wasn’t doing too much so started looking into paying more to build it up. Looked at Prudential AVC’s but went down the internal AVC’S route.
Tried setting it up end of last year but got knocked back by my doctor as he refused to do the medical. The form given appeared to ask them to guarantee that I would be in good health for the next 20+ years. Went back to WYPF and they eventually provided another form with different wording to say I was currently in good health and nothing to suggest my health would deteriorate. Back to the doctors, they took the form to their weekly meeting and again came back to say they wouldn’t do it. This reasons on this occasion were that they didn’t have the time to offer this particular service and they still were not happy with the wording.
Back to WYPF and they arranged for me to have a medical with the Local Authority occupational health (lucky in this respect). Passed the medical and I was set up. Extra £100.00 per month going into the pot. Unfortunately due to how long it took to sort out I’d had a birthday so my buying power had reduced a little.
As I find out more and more about pensions it’s becoming clear that I won’t be retiring early so will probably have to go to 67 (as it is now, could be higher by the time I get there).
I was hoping to build up some monies and buy more pension using lump sums in the future and also increase my £100.00 per month as other things get paid off. But, as I get older, each year the extra pension my money buys is reduced from the previous year ( just finding this stuff out now, I know I’m not alone in wishing I’d have started earlier)
Also I can’t just add to my current top up as it is a fixed contract. I will have to do the medical again and set up a new contract (urggh, they don’t make it easy do they? which I suppose is right really)
I’m not asking for great riches, just enough to get by on but it’s tough at this small scale and the thought of another 23 years is hard to take. Any advice is appreciated, though I suspect options are limited. It seems the more I could do in the short term would build up a larger pot.
Apologies for the lengthy post.
Thanks

AlanP_2 · 6 July 2017 at 1:22PM

First question that springs to mind - How did you manage to take some of your pension as cash to use with the mortgage at ~44 years old?

To answer your main point - how do I get more retirement income I think you will need to provide some additional detail.

How much did you tansfer in to the LGPS, more specifically what did it "buy you" in terms of service / CARE benefits?

How much do you want / need when you eventually retire?

What are your promotion prospects like as additional salary will earn you more within the LGPS?

What does the in-plan AVC contribution get you? I've not looked at these as I went for the standalone AVC option alongside my LGPS membership.

23 years is enough time to build a fairly substantial retirement situation in theory but will depend on your starting position, your target and what you can afford to invest out of your salary.

p00hsticks · 6 July 2017 at 2:31PM

AlanP wrote: »

First question that springs to mind - How did you manage to take some of your pension as cash to use with the mortgage at ~44 years old?

I though that as well - but on re-reading I think that the OP may be referring to his redundancy payout ?

atush · 6 July 2017 at 4:02PM

How i read it.

I was hoping to build up some monies and buy more pension using lump sums in the future and also increase my £100.00 per month as other things get paid off. But, as I get older, each year the extra pension my money buys is reduced from the previous year

If you want to retire early, switch from buying added pension to your AVC or pp/sipp. Then use this pot to live on from say 60-65 to whenever your DB pension pays out in full.

xylophone · 6 July 2017 at 4:14PM

I can't make much sense of this.

Were you made redundant by an LGPS employer but used most of your lump sum to buy additional pension before leaving and you now have a deferred LGPS pension?

Or were you made redundant by another employer, took employment with employer offering LGP, bought some form of additional pension in LGPS and are still contributing?

Brett72 · 6 July 2017 at 6:29PM

Hi
I worked for a private company and was made redundant. We were able to take the pension built up there in cash - part or whole.
I took about £3,000.00 as cash (I was much younger then) but transferred the rest to buy years when I got the job with the Local Authority.
I was tied in to a pretty poor mortgage deal so used some of the pension money I took as cash to get out of the deal early and sign up with what for me is a better deal - much lower cost and tied in for 10 years by which time the mortgage will be almost clear. Still got about 7 years on that.
Bought 10 years pension when I started my Council job and been there about 7 years.
My last statement showed I had built up £6,441.79 to March 17 - made £591.68 in the last year.
I have in January had a grade rise which will increase this and next year along with any pay rise, will get an increment that takes me into the next pension contributions bracket so will also add up.
Currently contributing £100.00 per month via APC's for 20 years and this will get me £1,730.10 extra pension.
My plan was to save some money and in the last few years make lump sums to buy more pension but looking at the figures the amount your money can buy reduces each year.
On top of this, the penalties - if that's the right word - for taking early pension take quite a chunk, obviously more the earlier this is done.
If I was retiring now, £15,000.00 a year would be great but in 20 years that probably won't cut it.
Think I've posted on here after looking to retire around 60 (or earlier) but the more I look into my pension, can't see that this is likely and was probably hoping for some magic solution that in reality is not available. Kinda mad at my younger self.
Cheers

AlanP_2 · 7 July 2017 at 1:38PM

My LGPS Statement shows a number of pension estimate figures:

1) What it is worth at the statement date with no further contributions i.e. the Deferred Pension I would have at 65/66 if I resigned now.

2) An estimate (based on current salary) of what it would be worth at 65/66 if I carry on working and contributing.

(2) is ~ 60% higher than (1) and I would expect your's to be even higher as you have more years left to work than I do to Normal Retirement Age.

Which one does your £6441.79 relate to?

Don't forget you will also get your State Pension at 66-70'ish which will give you more than half your £15k target at current levels.

Why not set yourself up a spreadsheet and calculate how the LGPS pension will grow Year by Year until NRA?

What i do is plan on an increase in Salary of 1% a year as that is the current deal and all increments have been frozen for 4 years so I don't need to allow for those. If a Grade change or something happens I just amend to the new salary and then let it run forward at 1%.

Break out the pre-2008 Final Salary portion and the CARE portions as they need to be treated differently.

I also use 1% as the rate of increase on the CARE element

Update Actuals each year when the Statement comes through and it just recalculates going forwards.

That way you will start to get an idea of what it is likely to pay out at NRA.

If you want you can take it one step further and apply the reduction factors for taking it early to see what that brings the annual pension down to and see if that looks sufficient although this is probably more useful in a few years time as you need to be at least 55 to access it.

Brett72 · 7 July 2017 at 7:22PM

Thanks for the responses everybody. Lots to think about re. planning.
My last statement as of 31/03/2017 details were, based on a rate of pay of £20,456.04 -
Final Salary Pension = £5,241.04
CARE Pension Account balance = £1,200.75
So total yearly pension = £6,441.79.

Benefits at normal pension age in 2039 = £17,547.20. When I'm 67.

I started the APC's from June 2017 at £100.00 per month and been quoted additional annual pension of £1,680.67 for the 20 year contract.

To retire at 62, I would lose 24%. To retire at 57, I would lose 40.6% based on current reductions.

atush · 8 July 2017 at 9:34AM

So what you do is save into AVCs or a DC pension or Sipp.

then use that money to live on from age 62 or 57 whichever you choose.

Any advice e for pension newbie?

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