Am I making the best of this?

Nual

Any advice greatfully received.

I am 57, hoping to retire at 61. 36 years contributions to state retirement pension now and this kicks in at 66. In the LGPS, with an annual pension of 15k in todays money if I go at 61. This includes buying 3 added years under the pre 2008 scheme rules, and will also get a lump sum of around 53k ( old scheme rules plus a frozen equitable life AVC pot that I stopped paying into when they crashed). Also got around 18k in cash ISAs and some NS&I savings plus around 30k in savings accounts. Mortgage paid off.

I have recently started paying 1000/ month into Prudential AVCs. Reasons include (1) reducing my taxable income so that dd 2 in med school ( finishes 2016) gets more grant, less loan and bigger bursary if I do an in year assessment, at least for a year, meaning 1700 less I need to sub her, not sure if I can afford to do for longer, and (2) as I can take AVC pot as a TFLS, I reckon even with 4 years to go I am getting a better deal than I can get on current saving rates.(3)Without this I will be a HRT in the coming financial year.

The AVCs are currently going into the Prudential deposit account, which is guaranteed to return deposit plus BoE base rate, 0.5%. I know , pathetic, but I have never invested as such. I keep trying to understand about S&S ISAs and going higher risk in the AVC pot, and then wimp out. Presumably I would go for low risk if I was to change this, as only 4 years to retirement, although I wouldnt access much capital on retirement so perhaps I could take a riskier approach on the grounds that I could keep the ISAs untouched for a while.

Any experts out there got any advice for me?

atush

Yes, I'd invest the AVCs into equities. Maybe income funds if you are risk averse.

benalder284

I'm a little younger but also a LGPS member; I take the view that I can afford to be a little bit more aggressive in my non-pension investments as the 'pension pot element' is effectively guaranteed. The only flip side for you is clearly the limited investment period - difficult balance as you won't have time to recover from any significant equity market falls. Suggests a diversified mix of equities, bonds, property might be worth considering depending on the available funds?

mania112

Someone who hasn't invested their money, probably shouldn't start now.

Although it depends what you want to achieve and your attitude to risk.

I think i'm right in saying that with the LGPS any tax free cash can be taken from the AVC pot first.

Therefore figure out what you can take as a lump sum from the AVC's before it starts to affect your annual penion.

Seems like you're looking at taking £53k as a lump sum, so if you're AVC's are over £66.25k you can have it all without affecting your pension.

Hope this makes sense, i've probably worded it badly!

jem16

mania112 wrote: »

Seems like you're looking at taking £53k as a lump sum, so if you're AVC's are over £66.25k you can have it all without affecting your pension.

Whilst the LGPS does allow for the tax free lump sum to be taken from the AVC pot, some of the £53k lump sum will come from pre 2008 scheme rules (if not most of it) which includes an automatic lump sum which will not come from the AVC pot.

mania112

Thanks. Can you not commutate the post 2008 and convert that back to the AVC?

Nual

Mania 112 Can you not commutate the post 2008 and convert that back to the AVC?

Sorry no idea what this means.

mania112

Nual wrote: »

Mania 112 Can you not commutate the post 2008 and convert that back to the AVC?

Sorry no idea what this means.

Sorry that was a question for the experts.

You have a portion of lump sum available as part of the old rules. I wonder if you can exchange some pension from the 'new' rules for some more lump sum.

If you can, this would likely be taken from the AVC pot and actually not affecting the new pension (normally it would need to be reduced in exchange for a lump sum, but not if you have enough in the AVC pot)

jem16

mania112 wrote: »

Thanks. Can you not commutate the post 2008 and convert that back to the AVC?

Pre 2008 the scheme calculates the pension on an 1/80ths for each year of service plus 3 times pension to give the lump sum. Ideally you should be able to do inverse commutation which would increase the pension and decrease the lump sum. Unfortunately this does not appear to be possible.

Post 2008 the scheme works out the pension on a 1/60ths for each year of service. There is no automatic lump sum.To receive a lump sum you have to commutate part of the pension at 12:1 which is a dire rate. This is where the AVC pot can be useful as you can take the lump sum and preservce the full pension.

Unfortunately the benefits for each are calculated separately. I would image the OP to have most of his/her years under the pre 2008 scheme.

Nual

Thanks everyone for responding.

The only other thing I think I could do is buy additional added years in £500 blocks? I will give more thought ( be brave!) to S&S ISAs and increasing risk in AVCs

Family history and lifestyle suggest I will not be one of those who reach a grand old age, and I would like to be able to pass as much on to DDs as possible, hence putting what I can into AVCs to take as a tax free lump sum.

Been on my own with DDs since youngest was 2 , so little chance to save hence no investing experience.

benalder284

Nual wrote: »

The only other thing I think I could do is buy additional added years in £500 blocks? I will give more thought ( be brave!) to S&S ISAs and increasing risk in AVCs QUOTE]

Not sure that buying added years still applies to the LGPS - you can make Additional Contributions (called ARCs - sorry can't recall exactly what this stands for) to purchase additional pension in blocks of £250/£500. Our scheme has a site where you can get on-line quotes.

As an aside - as my wife is younger than me this option (ARCs) and taking widows benefits options with them currently looks better value than putting the money into my wife's personal pension (note she is considerably younger than me)