Local Authority Pension - Best options to top up?

jem16

chucknorris wrote: »

I didn't join the scheme until 2010 Jem. Sorry I didn't quite understand what you were saying?

It was in reference to the LGPS, not the TPS. I shall make that clearer in my original post.

hyubh

chucknorris wrote: »

I'm sure people who work in LG can read can't they? Or are you saying that they are easily confused?

You have hijacked a thread about the LGPS with a TPS question. As you might say: can't TPS members read? (The title of the thread starts 'Local Authority Pension'.) If nothing else, I think it would be better for future lurkers if your question had its own thread, that's all.

Apparantly you can take more than 25% in the LGPS but you can't in the TPS!

Er, you might want to fix the typo, being apparently a teacher and all that

jabbahut40

jem16 wrote: »

Your table is not quite correct. First Monthly Payment column should be (without dependants).

Thanks Jem16. I have fixed this typo in my post above.

jem16 wrote: »

However taking £1000 pension bought at £117.32 (with dependants) means your wife would pay £93.90pm after tax relief. Over 10 years that would cost her £11,268.

As far as I'm aware, Public Sector Additional Pension amounts are index linked from purchased - you will need to check on that. So £1000 purchased at 2.5% CPI after 19 years would pay out £1599pa. To purchase a similar annuity would need a pot of £53,300 approximately.

So something that has cost your wife £11,268 has given a return of £53,300.

Sounds interesting. I'll definietly check re whether index links applies from purchase.

Can you please advise where you got the figure of £53K as the approx annuity pot for a £1559pa pension?

Also, Are there any penalties for deferring or stopping payments early into an ARC? I know that Prudential administer the AVC scheme and apply a 15% fee for transferring out within the first five years however the minimium monthly payment is £1 so if my wife struggled to keep up payments we could drop the monthly payment down to £1.

jem16 wrote: »

OK, let's assume £93.90 net payment into SIPP or AVCs for 19 years. Growth at 7% would see £43,699 giving an annuity of £1310.97pa. However it's cost her £21,409.20.

Sorry. Is this comparing apples with pears? The ARC quote was for 10 years however you are comparing this against an AVC with 19 years payment. Not sure I understand your logic here or am I missing something?

jem16 wrote: »

I'm not sure I would be ruling out ARCs.

AVCs will only be useful if you would rather take the 100% AVC pot as tax free lump sum. This could be beneficial if it increases the main pension. You would need to look at that closely. However fund choice is limited.

SIPP would give greater fund choice but would you beat the ARCs.

S&S ISAs will give more flexibility if it's not solely income that your wife is after.

Thanks. I take it restrictions apply to tax free lump sums from an ARC?

jem16

jabbahut40 wrote: »

Can you please advise where you got the figure of £53K as the approx annuity pot for a £1559pa pension?

On the same set up - ie index linked, spouse pension etc - it would be an annuity level of 3%. £53k with no tax free lump sum at 3% would give £1590pa.

Also, Are there any penalties for deferring or stopping payments early into an ARC?

I don't know about deferring but stopping it would normally see you get whatever was built up before stopping.

Sorry. Is this comparing apples with pears? The ARC quote was for 10 years however you are comparing this against an AVC with 19 years payment. Not sure I understand your logic here or am I missing something?

The logic here was that your wife would be paying out for 19 years instead of 10 years, yet still get less.

If paying for 10 years, it would likely see a pot of around £29,697 after 19 years but only paying in for the first 10 years.

Thanks. I take it restrictions apply to tax free lump sums from an ARC?

There is no option for tax free lump sum from ARCs. You are buying additional pension.

chucknorris

hyubh wrote: »

You have hijacked a thread about the LGPS with a TPS question. As you might say: can't TPS members read? (The title of the thread starts 'Local Authority Pension'.) If nothing else, I think it would be better for future lurkers if your question had its own thread, that's all.

Er, you might want to fix the typo, being apparently a teacher and all that

I didn't hijack the thread, I simply asked a question on a related subject, are you always so childish and petty?

kidmugsy

jem16 wrote: »

taking £1000 pension ... would cost her £11,268.

£1000 purchased at 2.5% CPI after 19 years would pay out £1599pa. To purchase a similar annuity would need a pot of £53,300 approximately.

Why are the taxpayers still funding this extravagance while the public finances are in ruins?

jem16

kidmugsy wrote: »

Why are the taxpayers still funding this extravagance while the public finances are in ruins?

The LGPS is fully funded unlike other public sector pensions. As to ARCs there is no employer contribution so nothing to do with the taxpayer.

jabbahut40

jem16 wrote: »

On the same set up - ie index linked, spouse pension etc - it would be an annuity level of 3%. £53k with no tax free lump sum at 3% would give £1590pa.

Sorry for being think (just me)...I still don't understand how you get to 53K to buy an annuity that would give £1590pa? Can you please explain in a little more detail on this point? Thanks

jem16

jabbahut40 wrote: »

Sorry for being think (just me)...I still don't understand how you get to 53K to buy an annuity that would give £1590pa? Can you please explain in a little more detail on this point? Thanks

The annuity rate for 3% escalation each year and 50% spouse pension - ie taking it as near as possible to the same options as the LGPS provides is 3%.

3% of £53,000 is £1590pa.

Try entering the details of a 65 year old woman and 66 year old man using a 50% spouse pension and 3% escalation and you will see it comes out as £1341.24 so even less than I suggested but it's a guide.

https://www.aviva.co.uk/annuities/quick-quote/

jabbahut40

jem16 wrote: »

The annuity rate for 3% escalation each year and 50% spouse pension - ie taking it as near as possible to the same options as the LGPS provides is 3%.

3% of £53,000 is £1590pa.

Try entering the details of a 65 year old woman and 66 year old man using a 50% spouse pension and 3% escalation and you will see it comes out as £1341.24 so even less than I suggested but it's a guide.

https://www.aviva.co.uk/annuities/quick-quote/

Thanks Jem16. Very clear.