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  • FIRST POST
    • Alexland
    • By Alexland 7th Jul 18, 1:35 PM
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    Alexland
    LGPS transfer in value?
    • #1
    • 7th Jul 18, 1:35 PM
    LGPS transfer in value? 7th Jul 18 at 1:35 PM
    Hi,

    I have applied for a new job which would give me access to the LGPS pension scheme. Am a bit bored in my current job and it looks interesting as a sideways move. I am aware you can transfer in existing pension(s) within the first 12 months but can't find any public information on what benefit this might give me.

    Currently late 30s with over 250k spread across my SIPP and workplace DC pensions and I was thinking of transferring in around 125k. Any ideas what inflation linked annual income this might generate from their normal pension / SP age?

    Alex
Page 1
    • Silvertabby
    • By Silvertabby 7th Jul 18, 1:52 PM
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    Silvertabby
    • #2
    • 7th Jul 18, 1:52 PM
    • #2
    • 7th Jul 18, 1:52 PM
    Once you have been set up on the pensions systems (won't happen from day one, even though payroll will /should have started to take pension contributions) you can ask for a quote without committing yourself to the transfer.
    • Alexland
    • By Alexland 7th Jul 18, 2:03 PM
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    Alexland
    • #3
    • 7th Jul 18, 2:03 PM
    • #3
    • 7th Jul 18, 2:03 PM
    Yeah I was kinda hoping to get an idea in advance from someone that knows the formula they use or has recent comparable experience as it might sway me one way or another on taking this job.
    Last edited by Alexland; 07-07-2018 at 2:06 PM.
    • Drp8713
    • By Drp8713 7th Jul 18, 3:02 PM
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    Drp8713
    • #4
    • 7th Jul 18, 3:02 PM
    • #4
    • 7th Jul 18, 3:02 PM
    It is pretty straightforward to work out.

    Amount of transfer in / Pension Factor + (49/160 x spouses factor)

    Factors here:

    http://lgpslibrary.org/assets/actgui/ew/TransfersF20170309.pdf

    You will want non club TVin factors for a normal pension age of 68 I assume.
    • Alexland
    • By Alexland 7th Jul 18, 4:11 PM
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    Alexland
    • #5
    • 7th Jul 18, 4:11 PM
    • #5
    • 7th Jul 18, 4:11 PM
    Thanks Drp,

    If I am using those factors correctly transfering in 125k at age under 40 would give an inflation linked circa 15k per annum from age 68. Does that sound about right?

    Alex
    • Drp8713
    • By Drp8713 7th Jul 18, 4:28 PM
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    Drp8713
    • #6
    • 7th Jul 18, 4:28 PM
    • #6
    • 7th Jul 18, 4:28 PM
    Yes that's it.
    • Alexland
    • By Alexland 7th Jul 18, 4:53 PM
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    Alexland
    • #7
    • 7th Jul 18, 4:53 PM
    • #7
    • 7th Jul 18, 4:53 PM
    Sounds fair but not overly generous compared to my anticipated investment performance.

    Still it would be nice to have some guaranteed income and a bit less stock market exposure in the mix.
    Last edited by Alexland; 07-07-2018 at 4:56 PM.
    • Silvertabby
    • By Silvertabby 7th Jul 18, 5:00 PM
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    Silvertabby
    • #8
    • 7th Jul 18, 5:00 PM
    • #8
    • 7th Jul 18, 5:00 PM
    There's more to a transfer in calculation than just the GAD tables but, assuming no previous LGPS membership or GMP then they'll give you a reasonable idea.

    Remember that if you do transfer in, and then opt to take your benefits before your normal retirement age, then your transferred in benefits will also be subject to early payment reductions.
    • Dox
    • By Dox 7th Jul 18, 5:07 PM
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    Dox
    • #9
    • 7th Jul 18, 5:07 PM
    • #9
    • 7th Jul 18, 5:07 PM
    Sounds fair but not overly generous compared to my anticipated investment performance.

    Still it would be nice to have some guaranteed income and a bit less stock market exposure in the mix.
    Originally posted by Alexland
    Nice enough to motivate you to get out of bed and go to work on a freezing Monday morning to do a job you are clearly only lukewarm about? I think I'd want my rewards to be rather more imminent!

    With 30 years or so of working life in front of you, maybe hold out for a job you think you'd really enjoy?
    • Alexland
    • By Alexland 7th Jul 18, 5:20 PM
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    Alexland
    I am more lukewarm about transferring the pension - the job looks interesting enough which is about as excited as I get about anything. Hopefully circa 20 years ahead if I can draw upon the ISAs and SIPP first.

    A DB scheme seems a pretty good thing to have towards the end of your career as you get the same outcome for the same regular contribution regardless of age when your money otherwise wouldnt have much time to grow in a DC scheme.
    Last edited by Alexland; 07-07-2018 at 6:27 PM.
    • Silvertabby
    • By Silvertabby 7th Jul 18, 7:16 PM
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    Silvertabby
    !!!8220; Sounds fair but not overly generous compared to my anticipated investment performance.

    Still it would be nice to have some guaranteed income and a bit less stock market exposure in the mix.
    Originally posted by Alexland

    Sounds pretty generous to me - are you forgetting that the amount of pension you 'buy' is indexed linked (CPI) both before and after retirement?
    • Alexland
    • By Alexland 7th Jul 18, 7:30 PM
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    Alexland
    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.

    Alex
    Last edited by Alexland; 07-07-2018 at 7:38 PM.
    • Silvertabby
    • By Silvertabby 7th Jul 18, 7:36 PM
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    Silvertabby
    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

    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.
    Last edited by Silvertabby; 07-07-2018 at 7:38 PM.
    • Alexland
    • By Alexland 7th Jul 18, 7:59 PM
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    Alexland
    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.
    Last edited by Alexland; 07-07-2018 at 8:03 PM.
    • Silvertabby
    • By Silvertabby 7th Jul 18, 9:06 PM
    • 3,248 Posts
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    Silvertabby
    !!!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
    I've just read this again - and you seem to be saying that there may not be any difference between:

    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.......
    • Alexland
    • By Alexland 7th Jul 18, 9:19 PM
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    Alexland
    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 Silvertabby
    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.

    Alex
    • Silvertabby
    • By Silvertabby 7th Jul 18, 9:23 PM
    • 3,248 Posts
    • 4,684 Thanks
    Silvertabby
    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 Silvertabby

    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.

    Alex
    Originally posted by Alexland

    Fair do's - but I'm glad we've got the pensions we have !
    • kidmugsy
    • By kidmugsy 7th Jul 18, 10:53 PM
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    kidmugsy
    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.
    • Thrugelmir
    • By Thrugelmir 7th Jul 18, 11:22 PM
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    Thrugelmir
    Sounds fair but not overly generous compared to my anticipated investment performance.
    Originally posted by Alexland
    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.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • Alexland
    • By Alexland 8th Jul 18, 7:40 AM
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    Alexland
    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.
    Originally posted by kidmugsy
    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).

    Alex
    Last edited by Alexland; 08-07-2018 at 9:02 PM.
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