In our weekly series, readers can email in with any questions about retirement and pension savings to be answered by our expert, Rachel Vahey, head of public policy at investment platform AJ Bell. There is nothing she does not know about pensions. If you have a question for her, email us at money@theipaper.com.
Question: I am 63 and worked for the local council for 14 years and have a defined benefit local government pension worth £33,700. I have health conditions and need to make some alterations to allow me to remain in my home. I have a workplace pension I want to put the defined local government pension into. How do I go about doing that, where can I get some help, and how much would I expect to be charged for this?
Answer: The Local Government Pension Scheme (LGPS) is a defined benefit scheme. The income you receive depends on factors such as your council service and salary while employed.
LGPS benefits can, in theory, be transferred to a private pension. But, in practice, it is more complicated than that.
Pension law lays out some general restrictions on when you have a right to transfer, for example you must be at least one year from the normal pension age set out in the scheme. If you built up benefits in the LGPS before April 2014 then your normal pension age is 65. The pension scheme may still allow you to transfer out, however, being close to pension age adds time pressure, so you should discuss your options with the scheme.
I am assuming that your workplace pension is a defined contribution pension, into which you and your employer pay. The amount available when you access it depends on the contributions made and investment performance.
If you want to transfer more than £30,000 from a defined benefit to a defined contribution pension, you must first take regulated financial advice because you are giving up valuable benefits.
However, the Financial Conduct Authority (FCA) says advisers should assume that exchanging a guaranteed lifetime income for an invested pension pot is unlikely to be in your best interests. They must clearly show why a transfer suits your circumstances, including your other income, savings, dependants and health.
You only need proof that you received regulated advice, not a positive recommendation, so you could transfer against advice. However, many schemes will not accept a transfer without a positive recommendation.
Check whether your workplace pension provider accepts defined benefit transfers, as many do not. If not, you could use a personal pension, such as a self-invested personal pension (SIPP), although many providers also require a positive adviser recommendation for defined benefit transfers.
To find an adviser, ask family and friends or search Unbiased and VouchedFor. Most offer a free initial consultation covering the key issues and likely fees. You will have to pay for advice even if the recommendation is not to transfer. As fees can be a significant share of the transfer value, consider whether they offer good value.
Once you choose an adviser, request a transfer quote from the scheme or your online pension account. Quotes are usually guaranteed for three months, and some schemes allow only one free guaranteed transfer value a year.
Stay alert to pension scams. If you are pressured to transfer quickly or offered an investment that sounds too good to be true, pause and seek independent advice.
You may have some other options, apart from transferring. You could ask to receive your LGPS pension early, although it would probably be reduced in value. Also, if you are too ill to work, you can ask for your pension to be paid immediately in full.
Your former employer will need to consider if you are permanently unable to do your old job because of your ill health. If you left the LGPS after 31 March 2008, they would also need to consider whether you are able to undertake any gainful employment in the time to your normal pension age.
One final thought. If you need to make your home more accessible you might be entitled to financial help. You can ask your local council for an assessment. The government guidance service MoneyHelper has more information.