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    • 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 2
    • Kynthia
    • By Kynthia 8th Jul 18, 9:43 AM
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    • 7,237 Thanks
    Kynthia
    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!
    • AnotherJoe
    • By AnotherJoe 8th Jul 18, 9:51 AM
    • 9,826 Posts
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    AnotherJoe
    I would not transfer anything, and keep the ones you have, SIPP and DC, for three reasons.


    First, the LGPS has a very late pension age. You can take your SIPP /DC benefits much earlier, 12 years at present. If you xfer you are giving up some of the opportunity for a phased taking of retirement benefits.



    Second, its big one way gamble, if you decide you dont like it and move elsewhere after a year or three, you've irrevocably put all those benefits, albeit only half, into the LGPS.


    Third, the LGPS has a very late pension age (OK i realise its the same as point one but its so important i thought I'd mention it twice"
    • Silvertabby
    • By Silvertabby 8th Jul 18, 11:30 AM
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    Silvertabby
    !!!8220; 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 !!!8221;

    Yes. Contributions are taken from salary, and therefore attract the same tax relief benefits as normal pension contributions. On the downside, employers don't chip in - so the employee has to pay the full whack.
    • Silvertabby
    • By Silvertabby 8th Jul 18, 11:32 AM
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    Silvertabby
    I would not transfer anything, and keep the ones you have, SIPP and DC, for three reasons.


    First, the LGPS has a very late pension age. You can take your SIPP /DC benefits much earlier, 12 years at present. If you xfer you are giving up some of the opportunity for a phased taking of retirement benefits.



    Second, its big one way gamble, if you decide you dont like it and move elsewhere after a year or three, you've irrevocably put all those benefits, albeit only half, into the LGPS.


    Third, the LGPS has a very late pension age (OK i realise its the same as point one but its so important i thought I'd mention it twice"
    Originally posted by AnotherJoe

    Actually, benefits can be transferred out of the (funded) LGPS to a private scheme - but that should only be done as a last resort due to the low transfer factors that would be applied.
    • AnotherJoe
    • By AnotherJoe 8th Jul 18, 11:40 AM
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    AnotherJoe
    Actually, benefits can be transferred out of the (funded) LGPS to a private scheme - but that should only be done as a last resort due to the low transfer factors that would be applied.
    Originally posted by Silvertabby
    Sorry I should have said that, when I said "irrevocably" I meant "effectively irrevocably " due to the 12:1 rate.
    • hyubh
    • By hyubh 8th Jul 18, 11:54 AM
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    hyubh
    First, the LGPS has a very late pension age. You can take your SIPP /DC benefits much earlier, 12 years at present. If you xfer you are giving up some of the opportunity for a phased taking of retirement benefits.
    Originally posted by AnotherJoe
    The actuarial reduction for taking an LGPS pension early, while clearly noticeable, is not intended to penal however.

    Second, its big one way gamble, if you decide you dont like it and move elsewhere after a year or three, you've irrevocably put all those benefits, albeit only half, into the LGPS.
    Length of membership will have zero impact on the value of the transfer in because what is bought with the latter isn't linked to final salary (or length of membership itself for that matter). In fact, if there's a reasonable chance the OP's time in a good DB scheme will be short, then that gives reason to maximise the benefit while they can.
    • hyubh
    • By hyubh 8th Jul 18, 11:56 AM
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    hyubh
    Sorry I should have said that, when I said "irrevocably" I meant "effectively irrevocably " due to the 12:1 rate.
    Originally posted by AnotherJoe
    That's the commutation rate, nothing to do with transferring out.
    • Drp8713
    • By Drp8713 8th Jul 18, 12:22 PM
    • 811 Posts
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    Drp8713
    As hyubh says, the LGPS may not remain a DB scheme forever.

    To be able to transfer in and get a guaranteed 30k p.a pension index linked, and still have 20+ years to pay into a SIPP or S&S ISA, means you can pretty much have your cake and eat it.

    A risk free indexed income, plus heavy investments in equities for the growth.

    I think I should be able to live off my S&S ISA/S&S LISA/SIPP when im older if I can maintain my current contribution level and get 5% growth, but having a risk free LGPS pension to fall back on is a good safety net. Especially if The Great Depression 2: The Sequel decides to kick off two years before you retire.

    My LGPS is only worth 5k p.a at the moment, and at age 30, I need it to stay the same until im 45 to get the minimum 18k I want as a safety net.
    • kidmugsy
    • By kidmugsy 8th Jul 18, 2:08 PM
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    kidmugsy
    Not sure but I am starting to wonder how much additional money we really need pension wrapped going forward.
    Originally posted by Alexland
    My morning paper carried its annual speculation about the ending of 40% tax relief. I suppose it's a one-way bet; it's hard to conceive of a government increasing that tax relief. Potential users of it might care to take advantage while it lasts.
    Free the dunston one next time too.
    • AnotherJoe
    • By AnotherJoe 8th Jul 18, 3:49 PM
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    AnotherJoe
    Its got to happen sometime km.


    And who could argue that "rich" taxpayers should get a better deal than "poor" 20% taxpayers especially when all that tax relief that was going to the "rich" will now be going into the NHS.


    Most likely it will be a flat rate, lets say 25-30% for all, and with the number set so theres, oh i dont know, maybe an extra 350M a week coming in?



    And then there's going to be an awful lot of people whining in here that their cunning plan to first overpay their 1.5% mortgage to clear it and only then start putting more into pension, has just been nuked from orbit, and cost them many tens of thousands over the next 10-20 years.



    • AnotherJoe
    • By AnotherJoe 8th Jul 18, 4:59 PM
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    AnotherJoe
    That's the commutation rate, nothing to do with transferring out.
    Originally posted by hyubh

    Its everything to do with it !!



    Point is, OP puts his 125k in, gets additional LGPS benefit, but when (if ) he wishes to chnage his mind and withdraw it (and i think it has to be all or nothing, he cant just take out what he put in) there's a very low unattractive commutation rate so his money is in effect stuck in there.
    • Silvertabby
    • By Silvertabby 8th Jul 18, 5:12 PM
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    Silvertabby
    That's the commutation rate, nothing to do with transferring out.
    Originally posted by hyubh

    Its everything to do with it !!

    Point is, OP puts his 125k in, gets additional LGPS benefit, but when (if ) he wishes to chnage his mind and withdraw it (and i think it has to be all or nothing, he cant just take out what he put in) there's a very low unattractive commutation rate so his money is in effect stuck in there.
    Originally posted by AnotherJoe

    hyubh is right. The commutation rate (of 1:12) comes into play when the fund member starts to draw their benefits from the LGPS and has the option of taking up to 25% of the notional fund value as tax free cash in return for a lower annual pension. ie, 12 of tax free cash for every 1 of pension given up.


    A transfer out to another pension fund, however, is an entirely different kettle of fish. GAD supply the transfer factor tables, but the calculation is based on other factors as well - age, NRA, membership, marital status, etc. About the only thing that doesn't appear in a transfer calculation is the formula 1:12!
    • AnotherJoe
    • By AnotherJoe 8th Jul 18, 5:16 PM
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    AnotherJoe
    hyubh is right. The commutation rate (of 1:12) comes into play when the fund member starts to draw their benefits from the LGPS and has the option of taking up to 25% of the notional fund value as tax free cash in return for a lower annual pension. ie, 12 of tax free cash for every 1 of pension given up.


    A transfer out to another pension fund, however, is an entirely different kettle of fish. GAD supply the transfer factor tables, but the calculation is based on other factors as well - age, NRA, membership, marital status, etc. About the only thing that doesn't appear in a transfer calculation is the formula 1:12!
    Originally posted by Silvertabby

    OK fair enough I stand corrected and apolgise



    So, is the rate substantially better than 12:1 ?
    Lets say the OP at that time is 45 & married and NRA is still 67.
    • Silvertabby
    • By Silvertabby 8th Jul 18, 7:27 PM
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    Silvertabby
    OK fair enough I stand corrected and apolgise

    So, is the rate substantially better than 12:1 ?
    Lets say the OP at that time is 45 & married and NRA is still 67.
    Originally posted by AnotherJoe
    No probs.

    A transfer out calculation is incredibly complex - it isn't just a case of picking up one factor from the GAD tables. However, your example would be lucky to get as much as 15 x their pension - probably less.

    A transfer out of the LGPS should be a very last resort - but a lot of people do it.
    • Alexland
    • By Alexland 8th Jul 18, 8:37 PM
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    Alexland
    To be able to transfer in and get a guaranteed 30k p.a pension index linked, and still have 20+ years to pay into a SIPP or S&S ISA, means you can pretty much have your cake and eat it.
    Originally posted by Drp8713
    If you put it like that it does sound quite attractive however as I would want to retire 10 years earlier at 58 then trading in both pensions plus a couple of years of 1/49th contributions would buy an inflation linked circa 20k pa. Still that's more than enough to cover our current family living expenses even with the mortgage payment.

    I guess this boils down to choosing between a bird in the hand versus one in the bush.

    Alex
    • AlanP
    • By AlanP 8th Jul 18, 8:50 PM
    • 1,214 Posts
    • 874 Thanks
    AlanP
    Don't forget you will also have access to the LGPS AVCs as well which can be used to fund the tfls. Has the same date as main scheme benefits but still a very attractive benefit.
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