LGPS 2014 - additional years contract

amandajc

I think I have gathered the following points from the discussion so far:

ARCs would not be a good idea as, given that I would like to take my pension 3 years early they would be subject to the same rules of reduction as the main pension.

If the rules regarding AVCs stayed the same come 2014 paying into these would be a good idea because of the advantages of being able to take it all as a tax-free lump sum. (Although perhaps I should feel a little guilty about this?)

However, the position as regards AVCs is likely to change which will wipe out this advantage. In this case I would be better to go for increased investment in S&S ISAs (and maybe some ARCs too? - I will have about £450 per month in total to invest for the next 8 years). This would mean that I don't have to take my pension early and when I do take it it will have been kept at a decent level by the ARCs (to make up for the fact that I am reducing my hours in Jan.)

I have the forms waiting to be filled in and want to start paying as soon as I have decided on the right option but I am beginning to wonder if it would be better to wait and see what happens come April? Is this the best way forward?

Nual

Added years contract + late career promotion + (increased?) AVC contributions + falling under generous transitional protections? You need to be super careful of the annual allowance - have you put the numbers through a spreadsheet and/or sought professional advice?

Believe me I am very far from exceeding the annual allowance!

It sounds good, added years plus AVCs etc but I am ( just) a basic rate taxpayer and a long way off a full pension. I worked in the 3rd sector prior to LG, and was too young to join their pension scheme. I left during the period when private providers were sending salesmen round to persuade us to contract out, and then couldn't afford to pay into LG pension when hubbie left , priority was keeping two daughters under 5 and paying childcare and mortgage.

I went full time before the youngest was 2, and have been playing catchup on the pension ever since. I still have one in Uni, nearly 3 more years before she finishes, and the eldest is on JSA/ temporary contracts/ freelance, minimum wage but in a field she is passionate about. Expensive.

NRA at 66 is hard. Women friends a year or so older can get it earlier. Many friends got it at 60. I manage someone who is 64 this month, went part time 18 months ago and has deferred her state pension from 60. What a difference a few years make !

The possible changes to AVCs mentioned above is really worrying. My understanding was that the AVC pot as TFLS was part of the package to get agreement on the changes introduced in the LGPS 2008 scheme, to compensate for there being no more lump sum with the pension.

The LG workforce is pyramid shaped, with many low paid blue collar workers ( manual workers, bin men, dinner ladies, domicilary care workers etc) and a few very well paid at the top. Any negotiations are focused on the big numbers , and the top tier bring in the management consultants to make sure they are ok. In contrast, the NHS workforce is diamond shaped and so the middle does very well. No idea about the civil service , police etc but I imagine they are similar to the NHS as there are few blue collar staff.

The whole pension thing is so arbitary, I have tried really hard to take control and do the right thing but its like smoke and mirrors , constantly shifting.

hyubh

The LG workforce is pyramid shaped, with many low paid blue collar workers ( manual workers, bin men, dinner ladies, domicilary care workers etc) and a few very well paid at the top. Any negotiations are focused on the big numbers, and the top tier bring in the management consultants to make sure they are ok

Your last sentence here is simply not true for the 2014 scheme, mainly down to the unions' involvement (shock horror, they did what they purport to do!): employee contribution rates will be more not less progressive (in the tax sense of 'progressive') than before, and the 1/49 accural rate/CPI+nowt revaluation combo benefits short term, lower paid workers above the longer term, higher paid ones.

The whole pension thing is so arbitary, I have tried really hard to take control and do the right thing but its like smoke and mirrors , constantly shifting.

You are still onto a very good thing with the LGPS - the potential loss of an advantageous AVC option is very small beer all told.

taktikback

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."

I've had a closer look at this and I'm not convinced that this is saying that the AVC cannot be taken as a tax free sum. Having read the original consultation, I believe that what they intend to limit is the use of the total value of both scheme and AVC in determining the figure that is used for the 25% tax free lump sum value.

That is understandable from an actuarial point of view, because the extent to which an individual can build up an AVC fund is an unknown liability for the scheme.

So what it appears to be saying is - the 25% lump sum must be CALCULATED from the value of the main pension, although there is nothing to say it can't be taken from the AVC

pandora205

Now that's an interesting interpretation. My LA already clarified previously that AVC sum would be taken in addition to (not instead of) the pre 2008 lump, as long as the notional 25% is not exceeded.

I wonder if taktikback's interpretation is correct? I've searched the LGPS site and can't find any other references to this change. If the ability to take AVCs as a lump is to be removed it would probably change my retirement plans, so I'm very interested in the topic.

taktikback wrote: »

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."

I've had a closer look at this and I'm not convinced that this is saying that the AVC cannot be taken as a tax free sum. Having read the original consultation, I believe that what they intend to limit is the use of the total value of both scheme and AVC in determining the figure that is used for the 25% tax free lump sum value.

That is understandable from an actuarial point of view, because the extent to which an individual can build up an AVC fund is an unknown liability for the scheme.

So what it appears to be saying is - the 25% lump sum must be CALCULATED from the value of the main pension, although there is nothing to say it can't be taken from the AVC

hyubh

pandora205 wrote: »

I've searched the LGPS site and can't find any other references to this change.

Argh... it's to do with the yet-to-be finalised transitional regs. Even if the LGPC (who produce the general LGPS sites) had something up, or a poor sod working at at an LGPS administrator says X about the matter, it will mean nothing if the law as it comes into effect says something else. Statutory scheme, statutory scheme...

pandora205

hyubh wrote: »

Argh... it's to do with the yet-to-be finalised transitional regs. Even if the LGPC (who produce the general LGPS sites) had something up, or a poor sod working at at an LGPS administrator says X about the matter, it will mean nothing if the law as it comes into effect says something else. Statutory scheme, statutory scheme...

Yes I know it's only in the consultation document and not finalised yet but it does seem likely to happen. The comments above about my local pensions department were made last year when I was enquiring about lump sums.

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

I'm in Wiltshire's LGPS & my advisor sent me this when I questioned if my ARCS would continue (I started paying ARCS in June 2013) -

I can confirm that the existing contract you have paying ARCs is totally protected. It will remain in force under the same conditions. I have copied the following information from the LGPS2014 website and you can find it by clicking on the link and looking under the tab ‘Paying in before April 2014’ and then look at Existing Contracts. This is what it says:

Existing contracts
All existing Additional Voluntary Contribution (AVC), shared cost Additional Voluntary Contribution (SCAVC), Added Years, Additional Regular Contribution (ARC), Preston part-time buy-back, and Additional Survivor Benefit Contributions (ASBC) contracts in force immediately prior to 1 April 2014 will continue from April 2014 on the terms of the contract when they were originally taken out.

Phew :T

hyubh

gardenia101 wrote: »

I'm in Wiltshire's LGPS & my advisor sent me this when I questioned if my ARCS would continue (I started paying ARCS in June 2013) -

I can confirm that the existing contract you have paying ARCs is totally protected.

This will probably prove to be the case, however neither the administrator of the Wiltshire Pension Fund not the Local Government Association/Local Government Employers (whose pension committee produce the national LGPS website) actually decide what the rules of the scheme are. That rather is the government.

pandora205

They're cutting it very fine for implementing the April 2014 changes, aren't they? I'm assuming there is no more news on AVCs and lump sums, etc.