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'll make that round of applause a bit louder.

It was pretty clear there was already significant confusion on the thread about pensions and whether they were good or bad for low earners. All the responses dealt with that and were trying to provide clarity.

Wading in with questions about high earners and their more complex tax issues was not remotely helpful and yes, stank highly of trying to catch people out.

I would be so thrilled with a final salary pension.

Your employer puts in over 22% of your salary into the pot. Why would you not want that?

@hadthesip2 "I think @regmover that was the OP's point. She was thinking perhaps it isn't HER best option. We all might disagree, but WE arent in her shoes."

I was responding to the fact that posters were wasting their time giving long and detailed replies about LGP to try to help you.

Oh, and speak for yourself - I am the proud holder of not one but 3 local government pensions. So I have some insight into Op's shoes.

I would be so thrilled with a final salary pension

Indeed. Whilst my circumstances are obviously specific to me they are also likely to be usual enough to be a fair example. I started with my current employer 17 years ago, 3 years after they closed their final salary scheme to new joiners, so I am defined contributions. The defined salary pension has a retirement age of 60 and pays 1/60th of pensionable salary for every full year of service. Employee contributions are 6%. So by 60 I would be able to retire with a guaranteed, index-linked pension of 25/60ths of my salary (I'm 52 currently). My pensionable salary is currently roughly 60k (see footnote) so my pension would be 25k assuming I get pay rises that keep up with inflation.

Instead, in the DC scheme, my employer pays in 5% and will match my personal contributions up to a further 5%. I've steadily increased my contributions over the years and am now paying 18% for a total of 28% when employer contibutions are added. I estimate that my pot will be around 500k by age 60. There's the first negative though, it's an estimate. I have no certainty and am also at risk of a stockmarket crash or sustained bear market decimating my pot. Without certainty I cannot plan with any degree of certainty. That is not a problem with the final salary scheme.

Then there's my likely income in retirement. With a DC pension I have 2 main choices. I can purchase an annuity or I can keep my pot invested and draw down from it. An annuity gives me certainty. However, based on current annuity rates at age 60 I'd be doing well to get 4% for an income of £20k. That's 5k pa less than I'd have got on the final salary scheme and I've paid a hell of a lot more in for the privilege. If I go the drawdown route I believe I should be able to have a higher annual income but there are so many unknowns (inflation rates and investment performance over possibly 30+ years) I can't plan with any certainty and am living in a permanent state of financial risk.

If given the choice, I'd give my left arm for a final salary pension and that will apply to the vast majority of people. The most important thing though is, whatever options are available to you, pay into a pension and put away as much as you can for your retirement - your older self will thank you for it. Whilst a DC pension is not as attractive as DB it is still, for the overwhelming majority of people, the best return on your money for long term savings due to the tax benefits. Do not listen to the many fools who claim otherwise. Pensions are not a scam, they will not be plundered by future governments and you are not better off investing in property, ISAs or whatever. The latter may well be an appropriate element of your overall retirement strategy but a pension should be the core of it.

Note: I've declared my own salary to support calculations and make my example real. I appreciate it is higher than many but it also lower than many. Don't get hung up on it, it doesn't matter.

I know some have said this already but it probably got lost in the irrelevant theorising...

You CAN transfer a Defined Benefit (DB) pension, including an LGPS pension, into a private plan. You can then use it as you see fit, though there will be a tax cost if your income including anything you draw from your pension is over the relevant tax threshold.

Whether you should be contributing to this pension is very dependent on your personal circumstances, e.g. if you are only 2-3 years from retirement or have 40 years to go would make a difference, so you should take professional advice. But in general, LGPS pensions are just about the best way of saving for retirement that you can get especially if you are a basic rate tax payer.

Is it worth making AVCs of approx £100 into LGPS or should I put it elsewhere?

Definitely worth an in-house LG AVC. It's tax free on the way in, and tax free when you take it out as a lump sum (subject to keeping it below certain limits, but at £100 pm you should be ok).

Still the best pension schemes going! I took mine at 57.5, 2.5 years early. When I did the spreadsheet having 2.5 years of actuarially reduced pension became disadvantageous at around 72, almost now but we had the money at a time when we could enjoy it!. Never leave such a pension scheme, you'd be crazy.

Thank you lidoshuffle!