How much to gain if I leave my pot alone?

QIhave a local government pension from a previous employment from January 2020 to August 2022. Although now at retirement age, I have no wish to draw that pension until I am at least 70 as I still work.

The pension fund is unable to tell me how much my it could increase by leaving it alone, compared with taking it now. Is there a formula I can apply, or can they provide a reasonably accurate forecast?

Dear Adrian

AAs you were in the post-April 2014 version of the Local Government Pension Scheme ( LGPS), you have a “Career Average” or Care pension, with your benefits based upon your average earnings when you were working for the local authority.

In terms of whether accessing the pension now or at some point before you eventually retire is financially beneficial, it depends on the specifics of the benefits on offer to you, and also any other pensions or assets you have.

With the LGPS, your total deferred benefits should currently be being increased each year in line with inflation. These “cost of living” increases continue once you start to take your pension. It is a valuable benefit.

At the end of each year, the pension balance account is adjusted the following April in line with the CPI inflation figure from the previous September. In the September after you left, CPI inflation hit a very high 10.1pc. This September, it’s not likely to be still on the high side, around 5pc or 6pc.

But you might take heart that the value wouldn’t fall if the economy entered a period of deflation.

There’s another increase that applies with this scheme if you are over the Normal Pension Age (NPA) of 65. If you take your pension after your NPA, it will be increased, based on the number of days from your NPA to the date you take your pension – another potentially valuable feature for you.

When you take your pension, your fund administrator will ask you if you want to swap any of your pension for a tax- free lump sum. With LGPS, for every £1 of annual pension you give up you will get a lump sum of £12, up to a maximum limit. If you take some as a lump sum, pension income is reduced.

You might also want to think about the returns and tax implications of saving or investing that money somewhere else until you need it.

If you did choose to access your pension, 25pc of it would be tax-free. Then the rest would be taxable at your marginal rate of income tax, regardless of whether you then put it in savings or a stocks and shares Isa, or just spent it. Part of your consideration of value for money might be what happens to the pension when you die. If you die after drawing your pension and before 75, a death grant is usually payable, equal to 10 times the pension less the amount already paid.

Becky O’Connor is director of public affairs for PensionBee, the online pension provider. Write to Pensions Doctor with your pension problem:

pensionsdoctor@telegraph.co.uk