Is there any advantage to transferring into new pension scheme? (Public sector)

[User2638483]

I have about 15 years of local government pension scheme. Started 2006 so the first couple of years would be the final salary scheme before it changed to career average. At the moment they’re 3 separate little pots over 2 different councils.

I’m now going to the civil service and have the option of transferring them into the CS Alpha scheme. I know there might be some negatives but can’t get my head round if there are any potential positives from transferring in?
What information do I need to find out in order to decide?

I’ve just realised… if I’m reading it correctly, that the pension age of Alpha is your state pension age which will be after 65 for me, currently 68.
Whereas I think…. The local government scheme it’s pension age or 65 if that’s sooner. So would be 65 for me.
So I’m thinking I should probably leave them separate?

You need to get proper financial advice.

Personally, I wouldn’t, because I don’t trust the civil service (well, HM Treasury) to not make changes which would be detrimental.

So keep them separate.

The potential positive is that if you're earning more in the CS than in LG, you may get more pension by moving your deferred pots.

With regard to retirement age, if the LG pension has an earlier retirement age then it may make more sense to leave them separate. The question is... will the LG retirement age remain at 65 or will it increase?

How long do you have to decide about joining the pots or not? 12 months?

Do you expect to progress in the CS? Earn around the same, or more than, or much more than in LG? This makes a difference, but of course you cannot be sure what the future will bring.

It may well be in your interest to get advice from someone qualified to give pension advice.

Im in the same situation OP so watching with interest!
My current pension is with legal and general (earned through 20 years private sector) so I dont want to make what could turn out to be a very expensive mistake

Thank you. 12 months I think yes.
The CS have also given me 2 to choose from - the alpha one and then another one which is defined contribution rather than defined benefit. But surely the alpha is better.

Initially I will be earning slightly less actually (but take home will be similar as I’ll be doing more hours) but in the long term I would hope to earn more.
There is a chance I will move back to working for a local authority in future, don’t know if that makes a difference.

I moved mine. Some years went into the nuvos scheme with pension age of 65 and final salary element. The remaining years went into alpha scheme with pension age of 68 and career average element.
Pluses for me were being able to keep everything in one place, and when I recently was promoted I could see my nuvos estimate increase.

Your final salary from LGPS will be transferred to the CS final salary which is nuvos. And your LGPS part of career average, I think that's from 2014 in LGPS will be transferred to CS alpha scheme. However if you have only final salary with LGPS it will all be transferred to CS equivalent.

When you request for transfer to CS, they will give you an estimate quote of what your LGPS will get you in the CS which you can use to compare and make informed decision.

Hmm ok thank you everyone
They didn’t mention nuvos at all.
My LGPS started 2006 so I think it’s only a bit of final salary.

The amounts aren’t large but I think I probably should get advice shouldn’t I.

Part time working (0.5fte or thereabouts) means my take home earnings have been pretty low especially since 2012

With Alpha, you should have the option of paying a bit extra in exchange for an earlier retirement (minimum 65).

One factor to consider is what final pensionable salary is LGPS based on and what will be your CS salary and potential final pensionable salary.

If you are 40 in 20 years time your LGPS final pensionable salary may give a poor pension comparable to 2042 salaries. Alternatively if you are 55 it may be a much smaller difference.

Hi OP

I know a lot about CS pensions due to my job. Firstly, Nuvos isn't available to new joiners - only alpha or Partnership (this is with a third party).

However - CS pensions is under review and alpha may be changed (related to the Fire Service winning a case against their pensions being ageist).

I would say get a transfer in quote when you join so you have the relevant info. You need to transfer in within your first year so you have time

Thank you
That’s really helpful as I want sure what to ask for.
Ok so I think I’ll opt to join Alpha rather than partnership. And get a transfer in quote - I ask Alpha for that?

It says I have to transfer all my LG pensions or none. So I wonder how it would work with the little bit that’s final salary and whether that would be wise. Totally clueless about the final salary bit. Would they use my final salary when I left that scheme? Or my actual final salary wherever I’m working? 🤔
Although newly qualified at that time I was working full time which I have never done since! Presumably final salary and career average schemes work off your actual take home pay rather than your fte salary.

It’s pretty depressing that my new fte CS salary is only £5K more than my local government salary was in 2006 16 years ago 😆 but hopefully there’ll be a chance to progress

It may well be to your advantage to transfer in. If you were to need to take early retirement on grounds of ill health you might get considerably more if all your service were in the new scheme as benefits of a current scheme are often enhanced but out of service not. ( Ditto benefits for dependants if you died in service.)
Similarly if your scheme is based on career average and your salary increases as your career progresses.
Are you in a Union? They may well have a pension expert to advise.

Oh yes I see what I mean.
So if I leave them separate my career average LG one will just pay on the basis of my average over those years?
But if I go on to earn more - and potentially will due to kids being older and being able to work more hours, plus hopefully progressing, that would push up the whole average 🤔
But then wouldn’t lower earnings in the local government phase bring down the average in the CS phase? Oh it’s so confusing my heads hurting 😆

I’ve got a recommendation for an IFA so I think it’s best to speak to them isn’t it. But will ask for a transfer in and out valuation in the meantime.

I’m 40 btw in case that’s relevant.
Entered the LG scheme at 25.

So if I stick with the CS and don’t go back to LG I could potentially have more time there eg.20 years. But who knows how things will go

Oops no I must’ve been 24 when I joined

I’d take advice. Do you know about the McCloud Judgement? It was illegal to move people from the old final salary scheme, to the average earnings Alpha scheme. This has to be rectified, so you should find out if transferring into another scheme will invalidate any claim you may have to have your final salary scheme reinstated.

@User2638483

Thank you That’s really helpful as I want sure what to ask for. Ok so I think I’ll opt to join Alpha rather than partnership. And get a transfer in quote - I ask Alpha for that?

It says I have to transfer all my LG pensions or none. So I wonder how it would work with the little bit that’s final salary and whether that would be wise. Totally clueless about the final salary bit. Would they use my final salary when I left that scheme? Or my actual final salary wherever I’m working? 🤔
Although newly qualified at that time I was working full time which I have never done since! Presumably final salary and career average schemes work off your actual take home pay rather than your fte salary.

Yes - once you have your new joiner pack from your employer contact MyCSP and request a transfer in quote. Their contact details will be on the new joiner info you receive. They administer CS pensions

Thankyou

And useful to know about the mccloud judgement

The McCloud case does make this more complicated as it affects both the LGPS and CS schemes. See links below.

Your TU rep may be able to provide someone who can explain how it will impact you.

www.civilservicepensionscheme.org.uk/members/2015-remedy-mccloud/

lgpsmember.org/news/story/mccloud_qanda.php

The McCloud judgment is very unlikely to affect you OP. It won’t affect your Civil Service scheme rights, because you weren’t in the Civil Service at the time the changes to the scheme were made that the McCloyd judgment has ruled were discriminatory.

You will fall into the category of members to be looked at in the LGPS, but it’s very unlikely your benefits will change.

When the new career average schemes were introduced, it was done differently in the LGPS to the other public sector schemes. In the other schemes, the old final salary scheme was closed (except for those closest to retirement) and a new career average scheme (CARE = Career Average Revalued Earnings) was opened which everyone else was moved into. That’s why other public sector schemes, including civil service, have to move people back to the final salary schemes, but as I said this won’t apply to you as you weren’t in the civil service then.

In LGPS the changes were done differently. Everybody irrespective of their age was moved to the new CARE arrangements, but those closest to retirement had an underpin where on retirement the benefits accrued in the CARE scheme were compared with the benefits they would have accrued in the final salary scheme had those rules continued, then the highest amount was paid. As a result of the McCloud judgment the underpin will be extended to younger members. However most people won’t see any change as a result of this. The CARE arrangement has a higher accrual rate than the final salary bit (49ths compared to 60ths) and the revaluation added to the CARE benefits has generally been higher than most people’s pay rises. This all means that the vast majority have so far been better off in the CARE arrangement than they would have been if final salary had continued.

However, even if you transfer out your LGPS fund will be required to still look at your benefits and pay anything else you would be entitled to as a result of McCloud so would pay a further transfer to the civil service.

All that is a long winded way of saying that you don’t need to consider McCloud when looking at whether to transfer or not.

Get your new civil service arrangement to provide a transfer quotation to you. That will show what the transfer will buy in the civil service and you can compare that with what you will get from LGPS.

Some things to consider:

• if you transfer it, it will then all be in one place. This can be administratively easier, but it means that you can only then take it all when the civil service says you can. This can also be an advantage if you have to retire early for any reason (redundancy, ill health) as it would then all be paid out. However, if you keep separate you will be able to take your LGPS benefits while still working for the civil service if you want to.
• retirement age - if you transfer your LGPS benefits they will then be payable at the civil service retirement age, which might be later than the LGPS retirement age.
• death benefits - check what each scheme will pay out if you die. Once transferred you will only get whatever death benefits the civil service offers. If kept separate you will get death benefits from both schemes. You need to see if the combined death benefit would be worth more than separate death benefits.
• future salary. The final salary bit in the LGPS is linked to whatever your FTE salary was when you left the LGPS. If you transfer it, it will then be linked to whatever your final salary will be when you leave the civil service. You need to think about whether your FTE salary on leaving civil service will be higher than the inflation-proofed value of your salary when leaving LGPS. Future salary won’t impact any of the CARE you have already built up - that’s not calculated by working out your average salary once you get to retirement. It’s done by taking your actual salary each year, giving you a proportion of that as pension (in the LGPS this is a 49th), and then inflation proofing each year’s contribution. Therefore, the CARE pension already built up isn’t affected by future pay changes. The CARE built up in the LGPS would just be moved over to the civil service scheme.

Hope that helps.

That’s really helpful and has really helped my understanding, thank you for taking the time.

So they use the full time equivalent salary to calculate, not just your actual earnings? I had no idea and assumed it would be my actual take home pay, especially since that’s what the contributions are calculated on.