LGPS local government pension advice needed! To combine or not!!

[Justbackfromnewwine]

I’m really confused so on the off chance someone knows about these things....

I joined local government in 2006 when it was still final salary scheme.

I worked full time at local authority A 2006-2009 and then part time (25 hours 2009-2012, 14.5 hours 2012-2013). Had a break 2013-2016 and since 2016 have worked at local authority B for 18 hours Pw. Salary very close to what it was when I left local authority A.

B has written to me asking if I want to combine my benefits, so that “pre April 2014 benefits continue to count as final salary benefits” or I can keep my deferred lgps benefits with authority A separate from my active pension account at B.

I think I’m better off combining but I’m pretty confused and unsure how the part time hours affect things.

It changed from a final salary to a career average scheme on 1st April 2014.

Does anyone have a clue about this?

If they will transfer your final salary benefits, go for it
the LGPS is one of the best schemes there is

I think what that means is this: you’ve built up a fraction of your final salary with authority A, say 5% of your final salary. If you keep it where it is then when you eventually retire it will be calculated as 5% of your full time equivalent salary when you left A, adjusted for inflation.

If you move it to B, it will be calculated as 5% of your full time equivalent salary when you leave authority B.

So if you expect to go up a grade or two between now and when you retire, then you should move it across.

The part time hours affect how quickly you build up a pension, but they don’t affect the final salary that’s used in the calculation. So don’t worry about that.

This decision doesn’t affect any pension you build up from now on. It just affects the value of the pension you’ve already accumulated.

I’m not a pensions expert but I had a similar situation and moved my pension across. I’ve benefitted hugely from doing that as my career has progressed a lot in my new organisation (so the final salary is much higher).

Also it doesn’t make any difference that you’re now on a career average scheme. I have that too. Your pension will come in 2 parts, the final salary bit and the career average bit. You can no longer increase the percentage of the final salary bit but you can change the final salary. The career average bit doesn’t count any salary before 2014.

Ok. Thank you so much. So I should opt to combine them as I expect my fte salary to not be less than it was when I left A and potentially more (it’s currently about the same because I’m a higher grade but A paid better as it was a London borough. I just have to make sure then that I never take a massive demotion...

And for context, when I joined in 2006 I was 25 so still quite a way til retirement....

I think the final salary bit from 2008-2014 is something like 1/60th of the final salary for every year.

THe career average part is actually FAB for people who want to go part time near the end of their careers
as their "final salary" does not get clobbered
because the change in the average over the number of years in the scheme is much less

I'm no expert but have a frozen LGPS which I'd been paying into for 7 years. Mine switched from final salary to the career average too along with everyone else. I think from what I heard from colleagues who are still that scheme that it's worth combining but I don't know the technical ins and outs. Can you contact the administrator of the scheme for some advice?

Ta1kinpeace - going part time shouldn’t affect your final salary because it’s worked out on full time equivalent pay; it just means you don’t build up as much.

The pension is worked out as (number of years worked x full time equivalent final salary x 1/60 or 1/80 or whatever), and if you work half time it takes two years to build up a year of pension. So what DOES affect your pension really badly is if you drop down to a lower band which has a lower full time equivalent salary.

Whereas with a career average pension you can drop down a band in the run up to retirement, and everything you’ve built up until then is unaffected. You just don’t build up the pension as fast in the latter years.

scarlet
True, the FTE rules, but they also never included overtime
whereas the new career average is based on actuals
spot the LGPS employer ...
so its a MUCH better system for the bulk of staff

OP, if you combine your benefits then the amount of service you accrued with authority A will be transferred over day for day. Basically, you need to compare your salary at authority B with the inflation linked value of your salary at authority B. If the salaries are more or less the same now, do you expect your full time equivalent salary at authority B to exceed inflation by the time you leave?

Other things to consider are that if you have to retire early from authority B, you may get your pension paid early. If you have combined your benefits then the early payment will include your pension from authority A. If you haven’t combined, then the pension from authority A wouldn’t automatically be paid early - you would have to apply separately for payment to authority A and no guarantee they would agree.

If you combine benefits, you won’t be able to draw any benefits until you retire from authority B. If you keep them separate, you could draw the benefits from authority A from as early as 55 (with a reduction for early payment) while continuing to work at authority B.

There’s no one size fits all answer as it really depends on your career and retirement plans. The salary comparison is the main thing to consider but I’ve mentioned a couple of other things for you to think about as well.

I have an LGPS pension (which pays out when I'm 60), as does my Teachers Pension. If, on returning to the UK next year, I manage to get another Local Authority job, I wouldn't combine my pensions, as I want the flexibility of a pension at 60. I was thinking along the same lines as Chessie. Mind you, 60 is under a decade away for me, so our retirement planning has been loosely based around this.

Thank you for all the advice.
I do reasonably expect my salary will be higher in future than it is now (currently very similar to when I left authority A as due to prioritising young children I haven’t moved up much but I think it’s likely I will in future.

The early retirement thing - I’m not sure as, only being 37 I haven’t really thought about it beyond thinking I’m not sure I can do this job for another 30 years! (Social work). But surely as I have a relatively small proportion (hopefully) of my pension in the final salary section from authority A (8 years - 5 of which were part time) its presumably not on its own going to be very much.

I think from what you’re all saying that the sensible thing is to combine but do shout if you think I’m making an error and you would do differently!

It grows though over time Justback. I left the LA in 2000, with 7.5 years in the scheme (5 years full time and 5 years job share), when I was 35. The pension has grown in the interim, albeit not hugely, and that combined with the 5 years in the TPS means I have the flexibility to stop work at 60, if I get another job when I move back to UK next year, and make up my 6 years of NICs to get the max I can on a state pension.