LGPS 2014 - additional years contract

gardenia101

woolly_wombat wrote: »

Do any LGPS experts know whether existing additional years and ARC contracts will continue from 1 April 2014, or are they still expected to be cancelled?

I am also concerned that there could be no facility to purchase additional survivor benefits as with current ARCs.

WW

We had our LGPS administrator talk to us a few weeks ago about the 2014 changes & she gave a long presentation... nothing was said about ARCS at all.

I collared her at the end & asked whether there would be any changes - she said she didn't know yet, but any changes would be communicated to members.

woolly_wombat wrote: »

I understand that there are moves afoot to prevent members of the LGPS from taking all of the AVC pot as the 25% tax free lump sum after 31 March 2014.

Would any LGPS experts like to comment?


WW

Again nothing in the presentation about changes to AVCS either.

Maybe Hyubh is right & they are clueless :rotfl: (Hyubh I'm paraphrasing, obviously!)

As soon as I hear anything I'll post. I hate waiting...

hyubh

gardenia101 wrote: »

I collared her at the end & asked whether there would be any changes - she said she didn't know yet, but any changes would be communicated to members.

She can't know because the government hasn't produced the final version of the transitional/amending regulations yet. In other words - the matter is still up in the air.

Again nothing in the presentation about changes to AVCS either.

Not the administrator's fault. One may get the feeling the government has cottoned onto the fact the new scheme will be barely less expensive than the current one (I mean really - many part time workers will see their contributions reduce) while employer costs will be going up anyway with the abolition of contracting out. As such, the government is now scrabbling around trying to find savings on the edges - cf. the sudden conversion to the idea of a single fund, despite the evidence showing little correlation between fund size and fund performance.

taktikback

Well the Wiltshire LGPS specifically marketed the Prudential AVC plan as being able to take the full AVC tax free (if the whole pot met the requirements). It's difficult to see them backtracking from that....

hyubh

taktikback wrote: »

Well the Wiltshire LGPS specifically marketed the Prudential AVC plan as being able to take the full AVC tax free (if the whole pot met the requirements). It's difficult to see them backtracking from that....

They are reporting the rules as they currently stand. What else can they do? The LGPS is a statutory scheme, and as such, if a government minister suddenly says 'dance', administering authorities have to do the foxtrot.

That said, AVCs are something different to the original topic of this thread, so I'm not sure why you're emphasising them. Mind you, personally I'd support their abolition whole-heartedly...

taktikback

I was responding to Woolly Wombat's comments in post #11. Why would you support the abolition of a scheme that potentially allows a 100% tax free payout and avoids commuting the base pension at the derisory rate of 12:1?.

It's true that the Government could stick a spanner in the works, but that wouldn't make much sense. I mean, who wants to volunteer for the headline "ministers attack pension savings for hard working families..." just before an election?..

hyubh

taktikback wrote: »

Why would you support the abolition of a scheme that potentially allows a 100% tax free payout and avoids commuting the base pension at the derisory rate of 12:1?

• Because the point of a public sector pension scheme shouldn't be to offer tax breaks to its higher paid members, which is what the current AVC situation effectively involves.
• Because AVCs date from when it was impossible to have a personal pension alongside LGPS membership.
• Because, notwithstanding the current government's incompetence (see pretty much any statement Gove or Pickles has put out about the scheme), the 12/1 commutation rate is a useful mechanism for keeping liabilities in check, and as such, encouraging its uptake would be no bad thing for the scheme.
• At the risk of stating the obvious, underlying the previous points is the fact I want the LGPS to continue and not be hobbled by historical debts.

It's true that the Government could stick a spanner in the works, but that wouldn't make much sense. I mean, who wants to volunteer for the headline "ministers attack pension savings for hard working families..." just before an election?..

More likely (and frankly, more accurately): 'Goverment removes tax loophole exploited by council fat cats'.

taktikback

Don't really get where you're coming from on this -perhaps some kind of idealistic notion that the LGPS is a co-operative rather than a pension scheme?

- The point of a public sector pension scheme is the same as a private sector pension scheme - to offer benefits to it's members - the same tax breaks are available to lower and higher paid members - one could argue that additional tax free cash disproportionately favours lower paid members because your assertion is that they are poorer, so the impact would be greater.

A higher uptake of the 12:1 commutation rate would no doubt benefit the scheme, but not the "lower paid" that you appear to be championing. You're trying to deny them some extra tax free cash!. Plus the scheme is underwritten by the government, so it's you and me paying for it's liabilities.

I also want the LGPS to continue -my wife is in it - it's a very good scheme -made all the better for the link to the AVC policy. As above, its debt position is irrelevant as it is fully underwritten. What might happen is that the scheme gets watered down in the future, but that won't have anything to do with a few tax efficient AVCs..

It's not "council fat cats" exploiting anything -that's just Daily Mirroresque nonsense. It's normal everyday members signing up to a legitimate benefit being offered to them. All the scheme members should be grateful for that opportunity..

hyubh

taktikback wrote: »

Don't really get where you're coming from on this -perhaps some kind of idealistic notion that the LGPS is a co-operative rather than a pension scheme?

Pardon? It's because it's a funded pension scheme that it's it in the interests of its members that liabilities don't skyrocket, otherwise it will be game over. And frankly, a DB pension scheme is indeed a 'co-operative' in some ways, given no individual member has their own 'pot' in the main scheme.

The point of a public sector pension scheme is the same as a private sector pension scheme - to offer benefits to it's members - the same tax breaks are available to lower and higher paid members

You realise the way AVCs currently work in the LGPS is relatively unusual, right? It's not even common amongst public sector schemes. And statistically, the sort of people who benefit are the higher earners who are able to take advantage of it.

- one could argue that additional tax free cash disproportionately favours lower paid members because your assertion is that they are poorer, so the impact would be greater.

I've no idea what you're trying to say. The LGPS AVC rules enable someone with the money to make large AVC contributions (just be careful about promotion years given the annual allowance), get the tax relief, then draw it back out tax free. A lower paid worker simply won't be able to make large AVC payments even proportionately... and actual take-up figures back that up.

A higher uptake of the 12:1 commutation rate would no doubt benefit the scheme, but not the "lower paid" that you appear to be championing.

Huh? I am 'championing' the scheme being affordable, and indeed criticised two posts ago how certain lower paid people's normal contributions will be going down next year.

IIRC from previous posts, your wife's a school bursar, right? Let me guess - she has taken out a fairly sizeable AVC, right...?

As above, its debt position is irrelevant as it is fully underwritten.

'Irrelevant' - what rubbish, sorry. That said, I can see how you might think that if your main source of knowledge about the LGPS is from a school's participation in it - the DfE won't let an academy fail due to pension costs, but there won't be any similar protection for (say) an outsourced catering company with TUPE'd staff.

What might happen is that the scheme gets watered down in the future, but that won't have anything to do with a few tax efficient AVCs.

Soon-ish LGPS funds up and down the land will have the results of their latest triennial valuations published, on which employer rates for the next three years will be based. You know what will be one of the factors that go into determining those rates? Commutation take-up rates, predicted vs. actual. Will it be a massively significant factor? No, but the importance will steadily increase over time as the proportion of 2008 and 2014 scheme accruals rise.

It's not "council fat cats" exploiting anything -that's just Daily Mirroresque nonsense. It's normal everyday members signing up to a legitimate benefit being offered to them.

Ooo, your wife certainly does have a sizeable AVC, doesn't she...?

All the scheme members should be grateful for that opportunity..

Maybe so, but it's hardly the core part of the LGPS 'package'.

amandajc

I can see that there is some fairly in-depth debate going on here. :-) Might there be someone who could help me with my decision as to whether to go with ARC or AVCs to top up my pension when I reduce my hours in January. Because I have years missing due to childcare etc I did think that my priority should be to keep my basic pension up at the £12,000 or so it is currently (hence I am favouring ARCs) rather than have a lump sum to withdraw, but maybe this is not the right angle to come at this from? (I am 54 and hoping to take a (reduced) pension at 63 with 25 years service). I would appreciate any thoughts on this.

taktikback

In your case, I would be seriously looking at the AVC option because of the prospect of taking 100% tax free cash given the size of the base pension and your likely contributions over the next few years. That would help with your objective of maintaining the highest level of base pension (with index linking etc) and avoid commuting any of it at a poor rate. You could then do what you like with the lump sum (further investment etc) having shielded it from tax.

Hyubh believes you have to be an undeserving rich parasite to do this, but you seem like a normal person who has taken out time to raise a family and will have a similar pension to my wife (who is paying £100 per month into her AVC...hardly Imelda Marcos is it...)