To think local authority pensions are a waste of money to join?

[jennymanara]

A local authority pension is final salary, so you can not cash it in. If you take it 5 years early you get an actuarial reduction of 25% in your pension. But local authority pensions are tied to state pension age. So you don't actually get your pension until you get your state pension. At the earliest this will be 67 but is likely to be a lot older.
AIBU to think there is absolutely no point in anyone joining this pension scheme?

I work for a LA and they switched from Final Salary to Career Average some time ago. If you work for an LA that is still Final Salary then grab it whilst you can.

Given that my local authority contributes 29% on top of my salary to a pension, I’d be insane not to join, it’s effectively refusing a hefty pay rise.

I’m happy to view it as a long term bond that matures when I’m 68 on that basis.

If you retire at 67 you'll have another 16 years of life (average female life expectancy is 83), how do you think you'll afford that without a pension?
Do you really think state pension age is going to remain at 67?

It's very likely I'll have to retire early on medical grounds so I am hoping joining it was a really good decision.

@EmmaGrundyForPM I am relatively low paid. Final salary benefits those who incraese their earnings a lot over the years. I am going to remain much the same.

I understand your frustration. If it was any other occupation scheme apart from Government sponsored ones then you could transfer your benefits into your own personal pension & then under the new pension freedom rules withdraw it all out.

If you want to transfer benefits out of a DB pension you have to get advice and approval from one of a small subset of IFAs authorized to do so. They will charge you for this service and don't assume they will sanction the transfer just because you want them to.

I’m a bit confused- why are you expecting to retire before state pension age anyway? Surely you retire then along with everyone else?

The reduction for early payment is fair. Roughly speaking (the calculations that went into coming up with the reduction will have been much more detailed), if you retire at 67, the average woman could be expected to live for about 20 years after that. If you want to retire 5 years early, that means you want your pension paid for an extra 25% of the time. And so the annual pension is reduced by 25% to ensure you get the same value overall.

@TooTrueToBeGood.

I am one of those IFA's. Just pointing out the options open to people in non-government DB schemes.

@passthecherrycoke. Some people dont want to work all their lives. Some people might want to scale back working to 2 or 3 days a week. I started working at age 16 -I've 52 now. I dont want to work another 15 years.

I’m a bit confused- why are you expecting to retire before state pension age anyway? Surely you retire then along with everyone else?

It's perfectly possible to retire up to 10 years before state pension age and draw any occupational pensions you have. They'll be adjusted to allow for the fact they'll be paid for longer. You'll have to wait for your state pension though.

Mine is amazing.

You'd be mad not to.

Good God! YABVU OP! You're considering turning down just about the best pension deal that is available? Don't do it!! Why on earth would you not join?!

I understand one can technically stop working before retirement age but Op is low paid and can’t afford to.

She can’t access her workplace pension before retirement age. That’s a different situation and not uncommon. Doesn’t make the pension bit worthwhile (what’s she going to live off if she doesn’t have a pension at all?)

It's very unlikely the age of retirement will remain where it is, the state of the country we will be working until we drop !!! And there's will definitely be no state pension, I have a private pension and nearly paid our house off, as our pension

I'm also at a loss as to how it's a good thing unless you earn big bucks.

On small salary, employer pays in a very considerable amount.

However you don't actually get that amount! You get blah /blah of your salary that year?! You don't actually get that money accrued.

I don't understand it.

Also I don't know why people are so accepting that there will be no state pension.

I guess if one opts out the scheme though one won't get the employer pay in

@Passthecherrycoke.

I think the OP is saying that to her, a defined benefit pension, that is not very flexible & when linked to a low salary might not be the best thing for HER. She didnt say that she wouldnt save at all. I've said she could put her money into an ISA that she could then access when she wanted- whether that was at age 55, 60 or at her state pension age. There would be no actuarial reductions for taking money out early & she could could stop & start payments in & out whenever she likes.

The Treasury like ISA's more than pensions.

But she wouldn’t get any employer contribution hadthesnip2 which is free money?

Sorry....posted to soon.

Over the last few years ISA contribution limits have increased & pension ones have reduced. Pension tax relief is a big drag on The Treasury.......

@Fragalino I’m not quite sure what your question means so maybe you could clarify a bit further? (The question about not getting the accrued money out)

Obviously this is hideously complex and there is a reason actuarys are paid so much but the way I would see it is:

(Numbers are crazy but just for ease of maths)

You salary is £120k a year. You pay 10% into your pension, and your employer pays 10%. Your pension fund therefore receives £24k PA from you.

You work in this job with the same figures for 40 years. You retire at 67 with an index linked annual pension of £80k (rounded 2/3 of your £960k pension pot)

If you live until 84 you have 17 years of pension and withdraw a total £1.3m.

Sorry if I’ve misunderstood something

I am saying that a pension that is tied to state pension age with big reductions if you take it early, is not worth having.

You can not transfer your local authority pension to a private pension scheme Just not possible.
And of course a state pension is always going to exist. People can not physically work until they die, no one will employ them for a start. Before state pensions people too old to work and not well off went into the workhouse.

My LA pension is tied to the state pension age and isnt final salary. But if I didn't have it I'd have to have an alternative. What do you suggest?