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  • FIRST POST
    • Tarama
    • By Tarama 7th Jun 17, 8:54 AM
    • 36Posts
    • 4Thanks
    Tarama
    WYPF query
    • #1
    • 7th Jun 17, 8:54 AM
    WYPF query 7th Jun 17 at 8:54 AM
    Hi


    I am new to posting and hope to get some ideas on the forum. Please be gentle.


    My 23 year old daughter has just a council job and of course is going to join the WYPF scheme. She will contribute 6.5% of salary (earnings approx. £27000) however it is very difficult to work out what the employer contribution actually is? In one section of the WYPF website it states "for every £1 you pay into the scheme your employer pays on average of £2" and elsewhere it states that this will vary annually dependent on the scheme performance. Thus how does one find this out?


    She wishes to pay extra and has 2 options - Additional pensions contributions (APCs) which buys extra pension or Additional voluntary contributions (AVCs) using one of 2 providers Prudential or Scottish Widows.


    We are unsure which may be the best option and if she chooses the AVC route how can we work out which provider to choose?


    Any thoughts would be welcome - many thanks
Page 2
    • atush
    • By atush 9th Jun 17, 5:02 PM
    • 16,155 Posts
    • 9,850 Thanks
    atush
    If the AVC is new, I dont think that counts anymore. I think the AVC had to be open by 2014?

    thanks for this - but do you mean the late age of retirement with LGPS? My daughter has an Aviva Stakeholder pension - just commenced this year also and contributes £200 gross pm to this.
    Basically, it could be a pension age of 70 for her to take her DB pension unreduced. Having one (or more) DC pensions means she could retire before that age, and not have her pension reduced for taking it early.

    As an example, taking an age 65 pension at 60 could be reduced by 25%. Taking it at 55, 50%. An age 70 pension (as might be when she gets there) would be reduced 25% at age 65, 50% at age 60 etc.

    This is why i didnt suggest buying additional pension. Hard to make a case for paying full price for something, that will be reduced in value to that extent.
    • Tarama
    • By Tarama 9th Jun 17, 8:07 PM
    • 36 Posts
    • 4 Thanks
    Tarama
    I wouldn't take the AVC earlier than the main LGPS benefits otherwise it can't all be taken Tax Free, from the scheme guide:

    Take your AVCs as cash

    You can take some or all of your AVC fund as a tax-free cash lump sum but you can only take it all as a lump sum if you draw it at the same time as your main LGPS benefits and provided, when added to your LGPS lump sum, it does not exceed 25% of the overall value of your LGPS benefits (including your AVC fund).


    To fill the gap if she wished to retire early, and not take the LGPS with an actuarial reduction then a PP or SIPP as well is a better option as that would still leave the AVC pot there to be taken tax free - a minimum 20% win straight away.
    Originally posted by AlanP

    Thank you AlanP


    I think what you are saying is that taking the AVC at the same time as retirement from the LGPS scheme may be the best option, because the AVCs can all be taken as a TFLS providing it does not exceed the 25% overall value. if this is taken earlier it will be subject to actuarial reduction.


    Thus if my daughter wishes to retire earlier she will need to have another pension in place. She has opened a Stakeholder Aviva this year and contributes £200 gross monthly. She hopes to continue this however I am sure there are perhaps other more suitable pension schemes. Any ideas about this?


    I understand at present it is possible to save max of £40,000 per year into a pension to avail of the tax relief and obviously she is not or perhaps ever will be earning enough to reach this lofty sum!


    thank you Tarama
    • Tarama
    • By Tarama 9th Jun 17, 8:16 PM
    • 36 Posts
    • 4 Thanks
    Tarama
    If the AVC is new, I dont think that counts anymore. I think the AVC had to be open by 2014?



    Basically, it could be a pension age of 70 for her to take her DB pension unreduced. Having one (or more) DC pensions means she could retire before that age, and not have her pension reduced for taking it early.

    As an example, taking an age 65 pension at 60 could be reduced by 25%. Taking it at 55, 50%. An age 70 pension (as might be when she gets there) would be reduced 25% at age 65, 50% at age 60 etc.

    This is why i didnt suggest buying additional pension. Hard to make a case for paying full price for something, that will be reduced in value to that extent.
    Originally posted by atush

    Dear Atush


    Thanks I understand that taking the DB pension early invokes actuarial reduction so having a plan B is necessary. Thus she has begun an Aviva Stakeholder pension in Jan 2017 and I am not sure if this will be the best option for her, so we will have to review this. I presume this will sit totally separately from the LGPS and is only subject to whatever the current pension regulations are. But she was keen to get something started.


    Thanks Tarama
    • Tarama
    • By Tarama 10th Jun 17, 10:12 AM
    • 36 Posts
    • 4 Thanks
    Tarama
    [QUOTE=atush;72674758]If the AVC is new, I dont think that counts anymore. I think the AVC had to be open by 2014?



    HI Atush

    I missed the first comment - and I am not entirely clear what you mean and we haven't yet read the AVC company's information documents. I know the pension scheme changed in 2014 but on the WYPF web site it does look like you can purchase AVCs and take all of them up to 25% of the LTA. Or am I missing something?

    A closer read of the information is required - this weekend.

    Thanks Tarama
    • Tarama
    • By Tarama 18th Jun 17, 3:36 PM
    • 36 Posts
    • 4 Thanks
    Tarama
    I wouldn't take the AVC earlier than the main LGPS benefits otherwise it can't all be taken Tax Free, from the scheme guide:

    Take your AVCs as cash

    You can take some or all of your AVC fund as a tax-free cash lump sum but you can only take it all as a lump sum if you draw it at the same time as your main LGPS benefits and provided, when added to your LGPS lump sum, it does not exceed 25% of the overall value of your LGPS benefits (including your AVC fund).


    To fill the gap if she wished to retire early, and not take the LGPS with an actuarial reduction then a PP or SIPP as well is a better option as that would still leave the AVC pot there to be taken tax free - a minimum 20% win straight away.
    Originally posted by AlanP

    Thanks AlanP


    all options are complex - I think with APCs you can only accrue a max of £6675 additional pension and this would cost £200 per month paying over 23 years. They have caveats which make them less attractive.


    AVCs can only be taken at the same time as the NRA which I think is 68 or 69 years and as far as I can see they cannot be withdrawn at 55 years.


    So it seems the best option is a PP and/or stocks and shares ISAs


    So aiming to retire earlier - another pot is needed - as I said earlier my daughter has a stakeholder pension with Aviva - (£200 gross monthly) which she will continue. Any thoughts about this?




    many thanks
    • Tarama
    • By Tarama 23rd Jun 17, 6:17 PM
    • 36 Posts
    • 4 Thanks
    Tarama
    wypf
    Hi

    I hope this links to my original query.

    We have looked at the LGPS website on the Additional Pension Contributions section - whereby you can buy check how much extra pension you can buy. It appears that to buy extra pension at this point is considerably better value than later in my daughter's career.

    For instance to pay an additional £120 monthly for 5 years buys £1279 pa and for 10 years buys £2277 pa. Using a lump sum purchase seems even better value with a direct £10000 buying £1836 pa and £15000 buying £2755 pa.

    I assume this is because the actual retirement date is so far away now?

    T
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