Paying APC's into LGPS pension

cambs1999 · 20 March 2017 at 11:29AM

Hi,

I'm looking into paying an extra £100pm into my LGPS for the next 17 years.

I've been looking at the online calculator on the LGPS website but I'm not clear on what this would add to my pension- it mentions an extra £88.86 of pension added to the account each year of agreement, based of an extra regular cost of £6.62 per £100 of extra pension. It also says total extra of pension to be bought is £1510.57. I've tried calling them for advice but although they were very helpful they couldn't offer me any further clarification as to the difference it may make to my pension when I retire. It is simply saying that it will cost me £960pa (net of tax) but will give me £1510.57 extra per year into my pension?

Anyone able to help me please? Thanks

AlanP_2 · 20 March 2017 at 1:38PM

cambs1999 wrote: »

Hi,

I'm looking into paying an extra £100pm into my LGPS for the next 17 years.

I've been looking at the online calculator on the LGPS website but I'm not clear on what this would add to my pension- it mentions an extra £88.86 of pension added to the account each year of agreement, based of an extra regular cost of £6.62 per £100 of extra pension. It also says total extra of pension to be bought is £1510.57. I've tried calling them for advice but although they were very helpful they couldn't offer me any further clarification as to the difference it may make to my pension when I retire. It is simply saying that it will cost me £960pa (net of tax) but will give me £1510.57 extra per year into my pension?

Anyone able to help me please? Thanks

From the numbers you are quoting I suspect it is saying it will cost you 17 years of £960 p/ (nett) to obtain an extra £1510.57 p/a on your pension.

Have you looked into the alternative AVC option? This allows you to build up an "inversted" pot similar to a personal pension that can then be taken as part of your 25% TFLS, effectively making it tax free?

Silvertabby · 20 March 2017 at 1:52PM

Don't forget that if you are aiming to retire before your normal LGPS retirement age (now same as your State pension age subject to a minimum of 65) your APC benefits would also be actuarily reduced for early payment.

cambs1999 · 20 March 2017 at 2:23PM

Thanks very much.

I'd arrived at the same after googling it a bit more.

I'm hoping to be able to go at around 60 so think I would lose around 30% of my pension/APC's so it's not looking at the best idea now.

Would I be better with an AVC with Prudential then as I'm assuming I can take that at 60?

Thanks for all your advice.

cambs1999 · 20 March 2017 at 2:57PM

Although I'm very confused now.

I would like to go at 60.

I've been in the LGPS from 2001 with a further transfer into this pension from another Local Government from 1999-2001.

Therefore I assume I can retire at 65? The table on the LGPS website advises that if I go at 60 I lose 22.7%, my original figure of 30% was 7 years from 67 but it seems I can go at 65.0, but the table then talks about a lump sum of member ship to 31 March 2008 with a reduction of 13.7%.

I'm lost at to how much I may lose! Can anyone help please?

Thanks again

hyubh · 20 March 2017 at 3:40PM

cambs1999 wrote: »

I've been in the LGPS from 2001 with a further transfer into this pension from another Local Government from 1999-2001.

Therefore I assume I can retire at 65? The table on the LGPS website advises that if I go at 60 I lose 22.7%, my original figure of 30% was 7 years from 67 but it seems I can go at 65.0, but the table then talks about a lump sum of member ship to 31 March 2008 with a reduction of 13.7%.

A few points:

You may well already know this, but the lump sum referred to is in relation to benefits on service before April 2008, when the scheme was 1/80ths pension+3/80ths lump sum (in April 2008 it became 1/60ths pension with the option of commuting for lump sum at a non-generous rate).
You won't have a single normal pension age (NPA) in the scheme. Final salary benefits (both 1/80ths and 1/60ths) will have a maximum NPA of 65, however given your start date, you'll benefit from 85 year rule protections to some degree.
On the the hand, your CARE benefits (and any APC) will have an NPA matching your state pension age.
All components of your scheme pension will have to be taken at once, outside of a flexible retirement.
If you go after 65, then your final salary benefits will have an actuarial increase, however if you go before SPA then your CARE benefits will have an actuarial reduction. (PS: the 85 year rule doesn't lower the age at which an actuarial increase applies to final salary benefits.)
While it can get a bit complicated, it's all for the good from your point of view, because it means the NPA of a given tranche of service has never been retrospectively increased.

Wentthedaywell? · 20 March 2017 at 5:26PM

Are APCs generally considered a good buy?

I am considering one following flexible retirement. If I understand correctly, I will have tapered protection, so only a 2.5% reduction, till 2020 after which I'd stop paying in as the reduction goes up to c.18%. It'd cost me, after the tax benefits, £775 p.m. for 2 years to get £1500 p.a. gross. (£64.58 per £100).

I can't work out whether £100 p.m. for the rest of my life is worth sacrificing £775 p.m. for a couple of years. What are people's thoughts?

(Sorry, I don't mean to highjack your thread Cambs)

Teaandscones · 20 March 2017 at 10:39PM

Wentthedaywell? wrote: »

Are APCs generally considered a good buy?

I am considering one following flexible retirement. If I understand correctly, I will have tapered protection, so only a 2.5% reduction, till 2020 after which I'd stop paying in as the reduction goes up to c.18%. It'd cost me, after the tax benefits, £775 p.m. for 2 years to get £1500 p.a. gross. (£64.58 per £100).

I can't work out whether £100 p.m. for the rest of my life is worth sacrificing £775 p.m. for a couple of years. What are people's thoughts?

(Sorry, I don't mean to highjack your thread Cambs)

Be careful regarding the tapered protection. I think it only applies to your main LGPS benefits, not any APC's

Wentthedaywell? · 21 March 2017 at 1:07PM

Thanks Tea, that practically wipes out any tax advantage without which APCs don't seem a very good deal at all.

cambs1999 · 21 March 2017 at 8:51PM

Thanks everyone for replying.

I'm not so convinced by the APC's now TBH, mainly due to the pension only being paid to me so if I pay £100 a month for 15 or so years but then die before taking my pension all my contributions are gone.

I'm now thinking of either AVC's though LGPS/Prudential or just getting a S&S ISA for now. Anyone got any opinion on this?

Paying APC's into LGPS pension

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