Anthony – Local Government
“For a decision that would have a profound effect on not only our retirement but our children’s long term future too, it seemed startlingly obvious what to do; so much so that we went through everything a few times to make sure we were not missing anything. My wife even described the whole decision a ‘no brainer’. ”
Having come to Trentham Invest to solve a Lifetime Allowance problem after reading about Nicola Downs in the Sunday Times, it quickly became apparent that Anthony had an even bigger question that needed answering.
As a local authority chief executive, upon retirement, Anthony would receive a pension of £89,101 per annum. However, in the event of his death his wife would receive just half that amount and once she died there would be nothing for their three children. Anthony was also six years away from his normal retirement date and would be heavily penalised if he accessed any of his pension fund now. Should he stay in the scheme or was there a better option?
What we did
Having obtained a transfer value from the scheme administrators of £1,991,127 and identifying the quantifiable differences between staying and transferring, Anthony and his wife decided it would be in their family’s best interests to transfer out of the scheme.
Analysis of the Local Government Pension Scheme (LGPS) rules showed if Anthony retired at age 60 he would receive £78,582 pa plus a lump sum of £192,957. Whereas, retiring at age 59 from a new private scheme would now give him £84,375 plus a lump sum of £312,500. This would enable Anthony to immediately clear his outstanding mortgage.
If Anthony had stayed in the scheme and were to die before retiring, his wife would receive between £37,508 and £42,209 pa, depending how close this was to retirement. However, by moving his pension to a private scheme his wife would receive a £1.9 million lump sum or would have the option of an £84,375 pension – the same as Anthony.
The final benefit that the LGPS could not even offer a single pound towards is the legacy that would be left to Anthony’s three grown children once both he and his wife have died. This would be £281,250 each.
- A new, accessible pension pot of £1,991,127 overnight.
- The option to immediately take a cash free lump sum of £312,500 instead of waiting another year and receiving £119,543 less.
- Death benefit today to Anthony’s wife of a £1.9 million lump sum versus £37,508 pa if he stayed in the scheme.
- If Anthony died in retirement his wife would receive either £84,250 pa or the whole pension fund less 55% tax or just £42,209 if he stayed in the LGPS.
- Legacy of £281,250 each to three children versus £0 if he stayed in the LGPS.
Note: The events and figures quoted in this case study are from a real Trentham Invest client; however, the names have been changed to protect client confidentiality.