Author Topic: Local Government Pension Scheme  (Read 424 times)

Slow road to freedom

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Local Government Pension Scheme
« on: November 26, 2017, 02:01:11 AM »
Hello Everyone

Iíve been working on a FIRE plan that accumulates a reasonable pot (c £800k, of which half is saved to date) before I pull the plug, and do something different. One way to get there more quickly might be to transfer an LGPS deferred pension. Does anyone have any experience of the transfer values that an LGPS transfer might achieve?

I know transferring out of the LGPS is not conventional wisdom. But conventional wisdom is often what consumer suckers hold.

A deferred benefit of £13k could yield enough to shave 2-3 years off my plan (currently 2023), which is an exciting prospect.

I do understand that LGPS pensions are valuable, but I will be c 50 when I hopefully FIRE so I donít wish to wait until 67 to take the pension. I have an average risk appetite; Iíd be happy to transfer to a Vanguard Lifestrategy fund.

Other than accelerating FIRE, there are no other reasons to consider a transfer from LGPS - no ill health, married etc - so deferred benefits are potentially valuable. If I wasnít considering an earlier exit.

Any help, comments, questions gratefully received.

I really want to do things other than work... :-)

Playing with Fire UK

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Re: Local Government Pension Scheme
« Reply #1 on: November 26, 2017, 03:58:49 AM »
It won't be easy or cheap to get a financial advisor to give you advice on transferring out of a valuable LG scheme.

Could you achieve a similar thing by spending down your SIPP (or whatever) after age ~55 and then spending your LGPS from age ~67?

Slow road to freedom

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Re: Local Government Pension Scheme
« Reply #2 on: November 26, 2017, 05:51:53 AM »
It won't be easy or cheap to get a financial advisor to give you advice on transferring out of a valuable LG scheme.

Could you achieve a similar thing by spending down your SIPP (or whatever) after age ~55 and then spending your LGPS from age ~67?

Itís a good question (which I canít answer right now). I guess Iím looking at ways of achieving FIRE with an element of tunnel vision - in other words, how can I hit my magic number. By not including a transfer value, it might well take me longer. But your question has made me look at the problem with a different perspective; time for a MMM-type analysis ...
I really want to do things other than work... :-)

Playing with Fire UK

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Re: Local Government Pension Scheme
« Reply #3 on: November 26, 2017, 06:15:21 AM »
I found it helpful to work backwards - from age 67, you'll need less from your stache; so you can run it down prior to that age.

The maths is harder than just 25x spending, but doing the sums helped me to think about what I was really trying to achieve.

Slow road to freedom

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Re: Local Government Pension Scheme
« Reply #4 on: November 26, 2017, 07:13:37 AM »
Good idea, many thanks.

Any helpful Excel templates??
I really want to do things other than work... :-)

dreams_and_discoveries

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Re: Local Government Pension Scheme
« Reply #5 on: November 28, 2017, 06:09:56 AM »
With interest rates rising, I thought the transfer values were reducing on DB pensions?

I can take a bit of risk, but if I had a govt DB pension, I'd be keeping it.

PhilB

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Re: Local Government Pension Scheme
« Reply #6 on: November 28, 2017, 06:47:40 AM »
Any helpful Excel templates??
It's quick and easy to create one:
Add your £13k DB to £8,300 of SP to give £21,300 from 67.   To replace that for the 17 years 50 to 67 would be £362k assuming that fund is invested cautiously just to match inflation.  That leaves you with £438k from your £800k.  At 4% drawdown that's another £17.5K.  £21.3k + £17.5k = £38.8k which if it was all taxable would be £33.3k pa post tax.  In reality a big chunk of your £800k is going to be tax free as some will be outside pensions and 25% of what is inside will be TFLS so you are probably looking at something closer to £35k pa sustainable income from 50 with more than half of it ultimately being from nice, safe, index-linked sources from 67.  Is that a level of income you are comfortable with?
If you could get a really good transfer quote, you may be able to squeeze out a bit more income by going that way, but at the expense of a whole lot more risk.  It's much easier to be sanguine about a stock market crash if you know your DB and SP covers your basic living expenses allowing you to simply wait it out.

shelivesthedream

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Re: Local Government Pension Scheme
« Reply #7 on: November 28, 2017, 09:01:11 AM »
You might want to have a look at MarcherLady's journal - I think there are a few posts about maths and employment pensions and savings.

worms

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Re: Local Government Pension Scheme
« Reply #8 on: November 28, 2017, 03:18:33 PM »
You should ask for a quote from the scheme administrator.  Iíve seen LGPS transfer values in the x20 range quoted, so that might mean £260k for your £13k.  This is why cashing in an LGPS scheme is seldom advisable.  In fact, I am going the other way and making additional payments into LGPS - for me, £10k is buying an index-linked £1k per annum at age 67.  I am unlikely to match that from payments into a SIPP and it allows me to balance risk-free income against other riskier investments.