Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • bioboybill
    • By bioboybill 4th Jan 18, 12:01 PM
    • 2,994Posts
    • 1,370Thanks
    bioboybill
    LGPS Early Retirement Wannabe
    • #1
    • 4th Jan 18, 12:01 PM
    LGPS Early Retirement Wannabe 4th Jan 18 at 12:01 PM
    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!
Page 1
    • Silvertabby
    • By Silvertabby 4th Jan 18, 12:15 PM
    • 2,871 Posts
    • 4,094 Thanks
    Silvertabby
    • #2
    • 4th Jan 18, 12:15 PM
    • #2
    • 4th Jan 18, 12:15 PM
    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.
    Last edited by Silvertabby; 04-01-2018 at 1:07 PM.
    • bioboybill
    • By bioboybill 4th Jan 18, 1:32 PM
    • 2,994 Posts
    • 1,370 Thanks
    bioboybill
    • #3
    • 4th Jan 18, 1:32 PM
    • #3
    • 4th Jan 18, 1:32 PM
    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
    • By Silvertabby 4th Jan 18, 1:51 PM
    • 2,871 Posts
    • 4,094 Thanks
    Silvertabby
    • #4
    • 4th Jan 18, 1:51 PM
    • #4
    • 4th Jan 18, 1:51 PM
    Actual advice is outside my remit, I'm afraid. Hopefully someone else will pop up with some ideas.
    • Moby
    • By Moby 4th Jan 18, 3:58 PM
    • 3,173 Posts
    • 3,961 Thanks
    Moby
    • #5
    • 4th Jan 18, 3:58 PM
    • #5
    • 4th Jan 18, 3:58 PM
    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!
    Brexit: Voting to take back what we had never lost in order to lose everything we had.
    Madness!
    • bioboybill
    • By bioboybill 4th Jan 18, 6:35 PM
    • 2,994 Posts
    • 1,370 Thanks
    bioboybill
    • #6
    • 4th Jan 18, 6:35 PM
    • #6
    • 4th Jan 18, 6:35 PM
    Yes, I'm hoping those tax breaks stay, and will look to up contributions further when I can.
    • lazyred
    • By lazyred 4th Jan 18, 10:24 PM
    • 13 Posts
    • 5 Thanks
    lazyred
    • #7
    • 4th Jan 18, 10:24 PM
    • #7
    • 4th Jan 18, 10:24 PM
    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
    • By OldBeanz 4th Jan 18, 10:34 PM
    • 739 Posts
    • 567 Thanks
    OldBeanz
    • #8
    • 4th Jan 18, 10:34 PM
    • #8
    • 4th Jan 18, 10:34 PM
    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
    • By bioboybill 5th Jan 18, 10:41 AM
    • 2,994 Posts
    • 1,370 Thanks
    bioboybill
    • #9
    • 5th Jan 18, 10:41 AM
    • #9
    • 5th Jan 18, 10:41 AM
    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.
    • bioboybill
    • By bioboybill 5th Jan 18, 10:43 AM
    • 2,994 Posts
    • 1,370 Thanks
    bioboybill
    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%.
    Originally posted by OldBeanz
    Yes, that's part of my plan.
    • Silvertabby
    • By Silvertabby 5th Jan 18, 11:46 AM
    • 2,871 Posts
    • 4,094 Thanks
    Silvertabby
    !!!8220; 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 !!!8221;
    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.
    • bioboybill
    • By bioboybill 5th Jan 18, 1:45 PM
    • 2,994 Posts
    • 1,370 Thanks
    bioboybill
    Kier administer our pension scheme and have a myownpension website where you can register and get a calculation of your pension from the current date or any day into the future, which is quite nice. However, when my wife tried to register a month before she took severance they told her she couldn't because she would no longer be a member even though she said she was deferring her pension. They said she can always request an estimate once a year for free. That seems daft to me and a waste of resources.
    • Silvertabby
    • By Silvertabby 5th Jan 18, 4:48 PM
    • 2,871 Posts
    • 4,094 Thanks
    Silvertabby
    Kier administer our pension scheme and have a myownpension website where you can register and get a calculation of your pension from the current date or any day into the future, which is quite nice. However, when my wife tried to register a month before she took severance they told her she couldn't because she would no longer be a member even though she said she was deferring her pension. They said she can always request an estimate once a year for free. That seems daft to me and a waste of resources.

    Going forward, your wife should receive an annual benefit statement as at 31 March of each year (although they won't be issued until later in the year). This will either be available to look at on line, or will be issued as a paper statement - depends on how your LGPS provider operates.
    • lazyred
    • By lazyred 5th Jan 18, 5:23 PM
    • 13 Posts
    • 5 Thanks
    lazyred
    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.
    Originally posted by Silvertabby
    Thanks for the replies and apologies for gong off topic. I am not eligble for 18 months but VER is still offered at my LA. Hopefully this won't change.
    • MakeMoneyWork
    • By MakeMoneyWork 6th Jan 18, 10:51 AM
    • 7 Posts
    • 3 Thanks
    MakeMoneyWork
    Hi All
    This is my first post on MSE and this topic is very pertinent to my current situation.
    My employer (Natural Resources Wales) will be running a voluntary exit scheme in 2018/2019. I was under the impression that it would not be suitable for me as my pension strain costs for receiving an unreduced pension would be around 110,000.
    I will be 57 at the time of the VES with 31 years pension contributions and thus eligible for immediate payment of my pension. I thought that if being made redundant through VES or business efficiency then under LGPS rules I would have to take my pension unreduced.
    From the comments here it appears that I would have the option to take the VES and elect to have my pension paid at the standard reduced rate for my age?
    If I have understood this correctly then this would result in no pension strain costs as they would be being met by me through the reduced pension?
    This would then mean I get the full VES lump sum payment and hopefully make me more likely to be accepted for VES.
    • bioboybill
    • By bioboybill 8th Jan 18, 3:03 PM
    • 2,994 Posts
    • 1,370 Thanks
    bioboybill
    Another question regarding LGPS pension, AVC scheme and voluntary severance:


    My plan is to retire at 60, take my pension under the 85 rule where my pre-March 31st 2008 pension is unreduced and take my AVC as a TFLS if that is still allowed. However, if a voluntary severance scheme was available around that time or maybe a year earlier I might be able to get accepted for voluntary severance and defer my pension for a year and live off the severance money. If I was to do that am I able to continue paying into the AVC and get the tax break on contributions until I take the main scheme benefits a year later? Or would I just have to leave the funds invested and take with my main benefits when I choose to take them?
    • MakeMoneyWork
    • By MakeMoneyWork 18th Jan 18, 10:13 AM
    • 7 Posts
    • 3 Thanks
    MakeMoneyWork
    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.
    Originally posted by bioboybill

    I have asked my LGPS pension administrator (Capita) about taking an unreduced pension as a result of redundancy and they replied with this "Under Reg 30(7) b you cannot do it. The benefits would not be reduced and there will be a cost and the employer would be billed for it. "


    I also asked my scheme provider, Environment Agency Pension Scheme, and they have given me a different answer "Unfortunately this query is something you would have to discuss with your employer, as although we could process your pension as a voluntary retirement to ensure reductions are applied, we are not able to advise how that would affect any possible redundancy payment."


    Can anyone throw any light on how other LGPS member have been able to get a reduced pension when getting redundancy? I could really do with having no strain costs.
    • Silvertabby
    • By Silvertabby 18th Jan 18, 10:42 AM
    • 2,871 Posts
    • 4,094 Thanks
    Silvertabby
    I have asked my LGPS pension administrator (Capita) about taking an unreduced pension as a result of redundancy and they replied with this "Under Reg 30(7) b you cannot do it. The benefits would not be reduced and there will be a cost and the employer would be billed for it. "


    I also asked my scheme provider, Environment Agency Pension Scheme, and they have given me a different answer "Unfortunately this query is something you would have to discuss with your employer, as although we could process your pension as a voluntary retirement to ensure reductions are applied, we are not able to advise how that would affect any possible redundancy payment."


    Can anyone throw any light on how other LGPS member have been able to get a reduced pension when getting redundancy? I could really do with having no strain costs.
    Originally posted by MakeMoneyWork
    This trend started a couple of years ago, when some of the smaller employers (usually schools) offered their staff 'redundancy' deals which only applied to the actual redundancy payment itself. If the pension fund member was over 55, they would have access to their benefits but on normal retirement terms - ie, reduced for early payment. They got round it by calling it something other than redundancy.

    The larger employers - ie, the actual Councils - didn't do this. Redundancy meant redundancy.

    Very slightly off piste, the 95K public sector cap doesn't seem to have been applied yet, but it must be imminent. Briefly, this means that exit payments - which will include the employer's fund strain as well as the redundancy lump sum - cannot exceed 95K.

    95K sounds a lot but would be easily do-able in the case, say, of someone on an only slightly higher than average salary, with many years service, who is made redundant at 55+. The plan is that the redundee would have to choose between the redundancy lump sum or the unreduced pension (or a combination of both) which would keep them below the cap.
    Last edited by Silvertabby; 18-01-2018 at 10:50 AM.
    • bioboybill
    • By bioboybill 18th Jan 18, 11:15 AM
    • 2,994 Posts
    • 1,370 Thanks
    bioboybill
    This trend started a couple of years ago, when some of the smaller employers (usually schools) offered their staff 'redundancy' deals which only applied to the actual redundancy payment itself. If the pension fund member was over 55, they would have access to their benefits but on normal retirement terms - ie, reduced for early payment. They got round it by calling it something other than redundancy.

    The larger employers - ie, the actual Councils - didn't do this. Redundancy meant redundancy.

    Very slightly off piste, the 95K public sector cap doesn't seem to have been applied yet, but it must be imminent. Briefly, this means that exit payments - which will include the employer's fund strain as well as the redundancy lump sum - cannot exceed 95K.

    95K sounds a lot but would be easily do-able in the case, say, of someone on an only slightly higher than average salary, with many years service, who is made redundant at 55+. The plan is that the redundee would have to choose between the redundancy lump sum or the unreduced pension (or a combination of both) which would keep them below the cap.
    Originally posted by Silvertabby
    My wife was only on 12K a year with 18 years service and aged 56 and they reckoned the strain cost of paying her an unreduced pension was about 85K. I have no idea where they came up with such a high sum since her unreduced pension was only going to be about 3600 a year and a lump sum of about 3K! BTW, does anybody know the answer to my question a few posts above (post16), where I ask whether I could defer my pension for a year and continue to pay into the Pru AVC and get tax breaks in the event of severance, or whether I would just have to stop payment and leave AVC sat there, as the AVC funds are only payable at the same time as my main pension?
    • Silvertabby
    • By Silvertabby 18th Jan 18, 12:17 PM
    • 2,871 Posts
    • 4,094 Thanks
    Silvertabby
    My wife was only on 12K a year with 18 years service and aged 56 and they reckoned the strain cost of paying her an unreduced pension was about 85K. I have no idea where they came up with such a high sum since her unreduced pension was only going to be about 3600 a year and a lump sum of about 3K
    Your wife would only have had minimal Rule of 85 protections (pre 2008 service only) so the overall reduction would have been over 40%. 85K does sound a bit high- but I've been retired for a couple of years now so it's possible that the factors have changed.

    BTW, does anybody know the answer to my question a few posts above (post16), where I ask whether I could defer my pension for a year and continue to pay into the Pru AVC and get tax breaks in the event of severance, or whether I would just have to stop payment and leave AVC sat there, as the AVC funds are only payable at the same time as my main pension?
    I would say no, but it's worth speaking to the Pru direct just in case things have changed.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

1,879Posts Today

6,624Users online

Martin's Twitter