Redundancy and local government pension scheme

[CraigNewmarket]

Please could someone explain when the below means?

Does it mean if I'm made redundant at 55 I can claim what would have been my full local goverment pension at 66 straight away?

If you are aged 55 or over, your main benefits are payable immediately without any early retirement reductions if your employer makes you redundant or you are retired on the grounds of business efficiency and you have met the two-year vesting period in the Scheme

[The Leaper]

CraigNewmarket said:

Please could someone explain when the below means?

Does it mean if I'm made redundant at 55 I can claim what would have been my full local goverment pension at 66 straight away?

If you are aged 55 or over, your main benefits are payable immediately without any early retirement reductions if your employer makes you redundant or you are retired on the grounds of business efficiency and you have met the two-year vesting period in the Scheme

I think what it means is that you can claim your accrued pension to the age when made redundant without any reduction for early payment. What is doesn't mean is that all your service up to age 66 is taken into account when calculating your pension on redundancy. Best advice is to ask the administrator for clarification.

R.

[halo34]

Yeah if its redundancy due to re-org past 55 you can get all of your accrued benefits - plus a redundancy tax free lump.

The only time they will pay out for full retirement including accrual is due to ill health but thats only if you arent able to work again basically.

[thepeoplespal]

Normally if you take a pension at 55 there are adjustments that reduce your pension to take into account improvements in your longivity and the longer time you will be claiming the pension.

Unfortunately if you take your full pension at 55 you aren't then able to rejoin the scheme (although I heard they can set.up a NEST scheme, but it made my brain hurt and I can't remember where I read that) and it may effect the amount you can put into another pension should you get another job. The max is around £3k IIRC, which given LGPS employer contributions is in excess of 20% and employee contributions are around 6.5% if earning say £35k (NHS is at least 3% higher) you'd bust through HMRC limits very quickly.

As always seek out professional advice with an expert in the LGPS, As I'm no expert, just some eejit on the internet. I say this as I've heard you can buy AVCs (additional voluntary contributions) and get every penny out on retirement tax free. This I just don't understand the workings of, as it doesn't seem to follow the legislation I'm aware of and I'm totally sceptical off as there is bound to be a catch somewhere. So there is a genuine reason to consult an expert that specifically deals with the LGPS. Your HR is likely to have some sort of scheme for retirement planning I know my council employer does, which is partly where I heard this.

[trevalvole]

thepeoplespal said:

Unfortunately if you take your full pension at 55 you aren't then able to rejoin the scheme (although I heard they can set.up a NEST scheme, but it made my brain hurt and I can't remember where I read that) and it may effect the amount you can put into another pension should you get another job. The max is around £3k IIRC, which given LGPS employer contributions is in excess of 20% and employee contributions are around 6.5% if earning say £35k (NHS is at least 3% higher) you'd bust through HMRC limits very quickly.

I'm similarly not an expert, but my impression is that the £3k limit only applies to a crystallising a DC scheme (like the AVCs you mention below), not for payment of a DB pension.

thepeoplespal said:

As always seek out professional advice with an expert in the LGPS, As I'm no expert, just some eejit on the internet. I say this as I've heard you can buy AVCs (additional voluntary contributions) and get every penny out on retirement tax free. This I just don't understand the workings of, as it doesn't seem to follow the legislation I'm aware of and I'm totally sceptical off as there is bound to be a catch somewhere.

My recollection is that as you can take up to 25% of your pension pot as a tax free lump sum, if your DB scheme has a smaller lump than this, then, subject to rules etc, you can top up the tax free lump sum with AVCs, which, on purchase, will be subject to tax relief. There's a calculation to work out the notional size of your DB pot (and you have to use the correct multiplier as there as different ones for different purposes). Another variation on the AVC scheme is that again if your DB lump sum is less than 25%, you may be able to use your some or all of your redundancy payment to buy an AVC just before your lump sum is paid, which reduces the tax on larger redundancy payments.

I agree with your comment that advice is required.