Local Authority Pension - Best options to top up?

jabbahut40

Hi,

My wife is a member of a final salary local authority pension scheme (http://www.spfo.org.uk/) for Glasgow City Council and is looking at options of how best to top up and/save for her retirement.

Prudential offer AVCs (see link below) however I am unclear what the pros vs cons of going with this options against potentially others (such as saving using S&S ISAs or taking out a private SIPP).

http://www.pru.co.uk/content/schemes/localgovavc/fund_information/your_funds/strathclyde/

Thoughts welcomed...

Jabba

jabbahut40

I have also noticed that my wife could pay Additional Regular Contributions (ARCs) to buy extra LGPS pension.

http://www.lgps.org.uk/lge/core/page.do?pageId=177116

Not sure whether this is better than AVCs or not?

Comments welcomed.

Jabba

chucknorris

jabbahut40 wrote: »

I have also noticed that my wife could pay Additional Regular Contributions (ARCs) to buy extra LGPS pension.

http://www.lgps.org.uk/lge/core/page.do?pageId=177116

Not sure whether this is better than AVCs or not?

Comments welcomed.

Jabba

I'm in the teachers' pension fund and I chose to buy additional pension rather than AVC's (also with the prudential) but to make your deision you will have to ask them for a quote. In the teachers' penion there is a calculator so you can see for yourself what you can buy (rather than obtaining a quote).

From the calculator I could see what I was getting (I bought £5,600 over 3 years), whereas with the AVC's you rely on the fund growing rather than a guaranteed defined amount.

taktikback

My wife just started an AVC with Prudential (with a nudge from me..). The killer benefit is that you can potentially take the whole lot tax free if you have a substantial main pension, because you can elect to take your 25% tax free cash, which is based on the whole pension, just out of the AVC - which means you avoid reducing your main indexed linked pension.

jabbahut40

taktikback wrote: »

My wife just started an AVC with Prudential (with a nudge from me..). The killer benefit is that you can potentially take the whole lot tax free if you have a substantial main pension, because you can elect to take your 25% tax free cash, which is based on the whole pension, just out of the AVC - which means you avoid reducing your main indexed linked pension.

Thanks for the comments to date. My wife believes that AVCs (rather than ARCs) are the way forward for her. Out of interest what funds did you select with Prudential? My wife is 45 and was looking at the Lifestyle Options 10 year option.

Comments welcome.

Jabba

jem16

jabbahut40 wrote: »

My wife believes that AVCs (rather than ARCs) are the way forward for her.

Any particular reason why?

taktikback

We went for the long term growth pension fund because we were willing to take an above average risk. You need to consider your own attitude to risk and be happy with the fluctuations that will inevitably occur. At 45 you have sufficient time to ride any storms. It also depends on how confident you are with reviewing and managing these things - I wouldn't be interested in automatic lifestyling arrangements -I prefer a more hands on approach - but they're a good option if you just want to set them up and not worry about them.

Our view was that the main pension fund is zero risk, so why not take a punt on the AVCs, but that may not be right for you.

I did look at the ARCs but they didn't seem to be spectacularly good value -I have nothing against that route in principle -I guess it depends on your existing portfolio and investment/retirement objectives

jabbahut40

jem16 wrote: »

Any particular reason why?

Expense. We felt that the costs of the contributions were very high for the returns (even recognising that these were index linked and guaranteed as part of the final salary pension).

jabbahut40

jabbahut40 wrote: »

Thanks for the comments to date. My wife believes that AVCs (rather than ARCs) are the way forward for her. Out of interest what funds did you select with Prudential? My wife is 45 and was looking at the Lifestyle Options 10 year option.

Comments welcome.

Jabba

Just noticed that the Lifestyle Option has two funds both of which are UK focussed which does not feel like a balanced portfolio. Should I be concerned?

Jabba

taktikback

Looks like different options are available in your scheme to the one my wife joined (Wiltshire). There is only one in her's and its the diversified growth fund switching over 8 years.

I guess it depends what the rest of your pension/savings portfolio looks like. On it's own, it's not a balanced portfolio, but if you have other investments in say North America,Europe,Asia and non equity - it would probably fits OK

I see you have 3 options -UK, UK or UK - so it's going to be UK then...
...unless you pick the funds you want and switch them yourself when the time comes - it's simple enough to do.

jabbahut40

taktikback wrote: »

Looks like different options are available in your scheme to the one my wife joined (Wiltshire). There is only one in her's and its the diversified growth fund switching over 8 years.

I guess it depends what the rest of your pension/savings portfolio looks like. On it's own, it's not a balanced portfolio, but if you have other investments in say North America,Europe,Asia and non equity - it would probably fits OK

I see you have 3 options -UK, UK or UK - so it's going to be UK then...
...unless you pick the funds you want and switch them yourself when the time comes - it's simple enough to do.

Hi,

Thanks for the feedback. My wife has no other pension arrangements other than being a member of the Strathclyde Pension Fund which is a final salary local authority scheme.

Here is the list of funds available to my wife under an AVC.

http://www.pru.co.uk/content/schemes/localgovavc/fund_information/your_funds/strathclyde/

As you can see there are some non UK funds however none of these are particulary high performing. Whilst I appreciate that my wife could take 100% of the AVC proceeds as a tax free lump sum (subject to limits) I can't help thinking that investing in a SIPP or ISA against better performing funds might be a better option.

Comments?

Jabba