LGPS 2014 - additional years contract

chiefie

taktikback wrote: »

You will see from the other replies that the rules are different. The reason I think you might want to look at them is because you have a sizable pension value behind you and enough years to use the AVC pot effectively as a tax efficient savings scheme which could give you a cash sum that would make it less necessary to commute your pension when you get there - this is particularly relevant if you are planning to retire early because the AVC is not affected by that as it's just a pot of money, but it might be substantial enough to give you a safety pot to balance the actuarial reduction on the main scheme

This is what I'm doing - I leave at 50 and am putting a lump sum into my standard life avc. I hope not to take the pension too early (possibly at 60 with actuarial reduction - my wife is older than me and i'd like some quality time together)but if I do I know I have a reasonable lump sum and this will take me thru till my private sector pension kicks in. :beer:

Good luck

amandajc

Thanks jem16. We do have a couple of S&S ISAs that we should be able to put more into over the next few years. I will have to work out if we can invest enough to avoid my having to taking the pension until 66 - I hadn't thought of that option. In that case I presume I stop paying when I finish work at 63 and just ask for it to be deferred? Thanks again

hyubh

taktikback wrote: »

Yes the school has caterers, and the school is an academy with the usual concerns about employer rates.

Um, my point was: academies don't really have employer rate concerns, unlike other sorts of employer in the LGPS. As such, your assertion that historical liabilities are 'irrelevant' is understandable, given your school-centric viewpoint, yet still rather silly all told.

My response is challenging your prejudice,

Think what you like... I expressed the opinion that abolishing the current AVC situation would be a reasonable thing to do, given various factors, chief among them the fact the 2014 scheme won't actually save much money. You then seem to get personally offended because doing this would directly effect your own family's future finances...

and also trying to make sure you don't put off perfectly normal posters from considering AVCs

The context was fairly obvious I'd hope, given I explicitly said I was expressing an opinion from the imagined POV of the scheme rather than any individual member... That said, in general, lower paid workers would IMO generally do better to consider an ARC contract over an AVC while for higher paid employees I'd advise the other way round. Ultimately depends on individual circumstances of course...

taktikback

Well, I'm told that Academies do worry about employer rates - mainly because of the effects of the small numbers of employees relative to what they were under the old Local Government structure, and the disproportionate effect of higher salaried staff on that small data set. It also depends on when the academies converted relative to the triennial valuation date. The next valuation is due soon, and a number of academies who got off lightly last time may not be so lucky this time.

My view might appear school-centric but I believe I have taken a wider view. It 's not a silly view, but then I suppose accusing you of being a Daily Mirror reader was a little provocative, so I probably asked for that reaction....

I didn't get offended by your opinion, but I did think it was prejudiced. which is fine - that's just my opinion. I don't know what the rest of the point you are making is. We should abolish AVCs because the 2014 changes aren't making much money? The 2014 changes are designed to reduce future exposure to the uncertainties and costs associated with living longer.

We take advantage of AVCs because they are offered by the scheme -If the scheme didn't feel it could afford them, then it wouldn't offer them.

I'd like to see some supporting evidence for your theory as to why lower paid workers (or any workers for that matter) would do better with ARCs over AVCs ?, given that pensions gained from ARCs are taxable and those from AVCs are potentially not.

The taxman pays for the AVC advantage. If, as you say, the scheme can match that 20% advantage with its ARC offering, then surely that must be to the detriment of the scheme -which rather undermines your original argument don't you think?

taktikback

It is also worth noting that ARCs are reduced in the same way that the main pension is reduced if taken before normal retirement date (which is now a moving target..) - that needs serious consideration for the posters who are planning to retire early...

laurel7172

I think-please correct me if I'm wrong-that hyubh is saying that your wife (and I, as it happens-not a fat cat but put some of a promotion pay rise into AVCs) will therefore be less likely to commute (in fact, be unable to commute) the maximum allowed by the scheme into a lump sum. And that low rates of commutation cost everyone else in the long run.

I had thought of it more as funding the lump sum that the 2008 scheme no longer provides automatically, but, actuarily, I suspect s/he has a point.

taktikback

Theoretically, you will be able to commute up to 25% of the value of the combined (post 2008)fund/AVC scheme. The benefit of the AVC is that you will be allowed to take it from that pot first without having to commute from the main scheme. What Hyubh is saying (and I'm sure she will correct me if I'm wrong..) is that NOT commuting that maximum possible from the main fund is to the detriment of the fund because the commutation rate is rubbish - if you do commute the maximum from the main fund it saves them money.

Actuarily that is going to be worse than pre 2008 when you were forced to commute the maximum, so that is a valid point- but then, it was the scheme that change the rules to benefit the members. It was that move that made the AVC scheme such good value going forward. You could argue that they were encouraging the uptake of AVCs to get members to save more for retirement!

atush

jem16 wrote: »

The other option is to use a S&S ISA to fund the 3 year gap between age 63 and 66. If you were able to put enough money away to live on for those three years, you could perhaps avoid taking the pension early and having the actuarial reduction.

Using savings and investments to provide for early retirement is a better idea than taking a FS pension early/reduced.

woolly_wombat

amandajc wrote: »

Hopefully the AVC rules won't change next year.

Don't bank on the LGPS AVC rules staying the same.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/244744/Local_Government_Pension_Scheme_2014_-_Government_Response_to_the_Consultation.pdf

"Local Government Pension Scheme 2014
Government Response to the Consultation

September 2013
Department for Communities and Local Government"

..........

"Reg. 17

Comments
Two respondents commented that by providing the opportunity for members to circumvent the main scheme commutation provisions to provide an alternative means of acquiring a tax‐free lump sum, the removal of the limit fundamentally undermines the objectives of the new scheme design to deliver saving and ensure the long term viability of the scheme.

Government response
To comply with Government policy, changes have been made to both Regulation 17(8) and Regulation 33(4) to ensure that any lump sum amount taken by a member from their AVC pot does not count towards the 25 per cent tax free lump sum allowed in respect of main Scheme benefits."

WW

FatherAbraham

jem16 wrote: »

Any amount that you don't use for tax free cash you would use to purchase an annuity. Not good value really. .

Not good value compared to what?

Curious regards,
FA