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    • dartilov
    • By dartilov 12th Jan 20, 10:14 PM
    • 102Posts
    • 82Thanks
    dartilov
    Pensions and investment
    • #1
    • 12th Jan 20, 10:14 PM
    Pensions and investment 12th Jan 20 at 10:14 PM
    I am currently 53 and have an LGPS pension since 40. Prior to that , was in the RAF from 17 and am receiving a pension already of 9344 per year until age 55 when it will go up to about 12600 and then with inflation every year after that.


    Have modest savings and will be mortage free July 2024.


    LGPS projections should I retire at 62 (I hope) will see about 11,000 and a lump sum
    of 55,000. This will give me an income of 23600 per annum in retirement with money in the bank.


    My questions are between now and retirement, some 8 or 9 years, is there a way in which I can achieve enhanced pension or lump sum through paying additional funds into something? If so what is best to look at.


    I could probably afford to save/invest an extra 250 - 350 a month into something if the outcome is beneficial.


    Thanks in advance.
    Nil Satis Nisi Optimum


Page 1
    • Dox
    • By Dox 12th Jan 20, 11:11 PM
    • 1,863 Posts
    • 1,397 Thanks
    Dox
    • #2
    • 12th Jan 20, 11:11 PM
    • #2
    • 12th Jan 20, 11:11 PM
    What are you trying to achieve: maximum financial benefit, maximum flexibility in terms of accessing your benefits, or somewhere between the two?

    If you are still building up benefits in the LGPS you can pay more to that, or set up a separate private pension as well as paying in to the LGPS.
    • AlanP
    • By AlanP 13th Jan 20, 12:16 PM
    • 1,838 Posts
    • 1,520 Thanks
    AlanP
    • #3
    • 13th Jan 20, 12:16 PM
    • #3
    • 13th Jan 20, 12:16 PM
    I am currently 53 and have an LGPS pension since 40. Prior to that , was in the RAF from 17 and am receiving a pension already of 9344 per year until age 55 when it will go up to about 12600 and then with inflation every year after that.


    Have modest savings and will be mortage free July 2024.


    LGPS projections should I retire at 62 (I hope) will see about 11,000 and a lump sum
    of 55,000. This will give me an income of 23600 per annum in retirement with money in the bank.


    My questions are between now and retirement, some 8 or 9 years, is there a way in which I can achieve enhanced pension or lump sum through paying additional funds into something? If so what is best to look at.


    I could probably afford to save/invest an extra 250 - 350 a month into something if the outcome is beneficial.


    Thanks in advance.
    Originally posted by dartilov
    A lump sum of 55k against an LGPS pension of 11k sounds very high.

    For service up until 2008 you got 1/80th Final Salary per year as pension with an automatic lump sum of 3 * Annual Pension.

    No automatic lump sum for any post 2008 service.

    Do your figures show the maximum Lump Sum you could take by commuting part of your annual pension at a rate of 1:12?

    I'm not saying you shouldn't take the maximun lump sum as having a one-off payout may be what you need for some reason but its unlikley to be the most beneficial option over a period of retirement that could last 30+ years.

    Options to increase LGPS benefits are:
    1. Get a promotion / payrise to increase the value of yopur pre-2014 pension that is linked to Final Salary. Will also increase post-2104 CARE benefits but the big win comes from pre-2014 service.
    2. Investigate APCs, which allow you to buy more LGPS annual pension. But note these would be reduced if payment starts ahead of normal scheme retirement age as would the standard LGPS pension you have accrued.
    3. Investigate AVCs which alalow you to build up a "pot" alongside your LGPS DB pension that can be taken Tax Free subject to an overall limit of ((25% of (Annual Pension * 20) + Pre 2008 Lump Sum + AVC pot value))

    The other option, or could be done in parallel, is to open a standalone SIPP / PP that you live on from Age 62 and defer your LGPS thus reducing the impact of early payment reduction.

    How much do you need in retirement?

    Is there a spouse / partner in the picture as optimising retirement planning as a couple is the best approach?
    Last edited by AlanP; 13-01-2020 at 12:19 PM.
    • dartilov
    • By dartilov 15th Jan 20, 10:05 AM
    • 102 Posts
    • 82 Thanks
    dartilov
    • #4
    • 15th Jan 20, 10:05 AM
    Pensions and investments
    • #4
    • 15th Jan 20, 10:05 AM
    Thanks for taking the time to reply. The 55k lump sum is taking the maximum possible at the detriment od a reduced annual LGPS pension.


    My thinking was with the LGPS and RAF pensions this would bring in 24000 per annum which I believe would be sufficient. The lump sum was merely seen as very useful to have at that precise moment in time for a house move on retirement.


    In particular response to your advice.




    Options to increase LGPS benefits are:
    1. Get a promotion / payrise to increase the value of yopur pre-2014 pension that is linked to Final Salary. Will also increase post-2104 CARE benefits but the big win comes from pre-2014 service.
    My pay will increase for the next 2 years to top of grade approx extra 2k.

    1. Investigate APCs, which allow you to buy more LGPS annual pension. But note these would be reduced if payment starts ahead of normal scheme retirement age as would the standard LGPS pension you have accrued.
    2. Investigate AVCs which alalow you to build up a "pot" alongside your LGPS DB pension that can be taken Tax Free subject to an overall limit of ((25% of (Annual Pension * 20) + Pre 2008 Lump Sum + AVC pot value))
    AVC's look a safer bet for me.


    The other option, or could be done in parallel, is to open a standalone SIPP / PP that you live on from Age 62 and defer your LGPS thus reducing the impact of early payment reduction.

    How much do you need in retirement? Anything above 24k will be fine, I have not included SP in this which, at present, will get 168.60 (forecasted) per week at 67, so that would be 32k at 67 for me.

    Is there a spouse / partner in the picture as optimising retirement planning as a couple is the best approach?


    Wife is 49 and only started full time working with a University in 2007 byt aims to retire when I do, she will be 59 and is just reliant on Uni pension and OAP at relevant stages and will also get a part of her ex-husbands pension at NRA, (2.5k per annum)
    Nil Satis Nisi Optimum


    • AlanP
    • By AlanP 15th Jan 20, 12:25 PM
    • 1,838 Posts
    • 1,520 Thanks
    AlanP
    • #5
    • 15th Jan 20, 12:25 PM
    • #5
    • 15th Jan 20, 12:25 PM
    I wouldn't say AVCs ares safer as by definition they are subject to market returns, whilst APCs are guaranteed income in the same way as the main LGPS benefits.

    AVCs may be more suitable for your situation though as they are for my wife and myself.

    Double check SP forecasts for both of you as you may have to pay for extra years even when retired to get them to the full New SP level. Not a big issue and a good return on the cost but a few people on here have been suprised as they only look at the big NUMBER which shown what they COULD get if they continue contributions.

    Is there any scope to improve your wife's pension situation so that incomes in retirement are better balanced and she can make full use of her Tax Allowance each year, particularly before she receives her SP?
    • crv1963
    • By crv1963 15th Jan 20, 1:02 PM
    • 1,099 Posts
    • 2,430 Thanks
    crv1963
    • #6
    • 15th Jan 20, 1:02 PM
    • #6
    • 15th Jan 20, 1:02 PM
    I agree with AlanP- if the extra savings are put into your wifes pension then she should be able to take most of it without paying tax especially if her current pension provision is quite low.

    We are doing this saving into my wifes pension and unless/ until she gets the survivors pension from my DB pension she will remain under the income tax allowance in retirement- result more money as a joint income.
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
    • atush
    • By atush 15th Jan 20, 7:24 PM
    • 18,101 Posts
    • 11,515 Thanks
    atush
    • #7
    • 15th Jan 20, 7:24 PM
    • #7
    • 15th Jan 20, 7:24 PM
    Given you are still working, and getting 9K pa in pension income now, i'd also invest in a S&S isa.

    And i would not take a TFLS from your LGPS unless you open an AVC as this way your pension is not reduced.
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