Advice Requested for partners LGPS pension

Drp8713

I'm hoping the 100% AVC lump sum will remain protected, as buying added years was for people who opened the fund before November 2001.

In regards to the initial query, yes she can pay up to 50% of her salary into an AVC, however be aware that it is likely that if she does that her AVC fund alone will be more than her HMRC maximum lump sum and may not be able to all be taken as cash

billchecker1

Thanks both for the detailed answers. There is clearly a lot to this and I am struggling with some aspects.


I think that the 50% of salary limit wont apply as that would be circa £7000 and far more than I need to make my wife a non-tax payer.


So am I correct in saying the benefit to me doing this is to:


A: Make her a non-taxpayer, meaning she will pay £70 less a month (income tax).


B: Allow me at the end of her service to put these overpayments to facilitate a larger tax free lump sum?


How much is this worth though? I mean for a full tax year I would be looking at around £420 per month. This is not insignificant. Will this be worth it for us?

hyubh

B: Allow me at the end of her service to put these overpayments to facilitate a larger tax free lump sum?

Well an AVC isn't an 'overpayment' - it's a separate pension pot, in the same way a personal pension set up entirely independently from work wouldn't be 'overpaying'. More constructively, you should check whether the AVC provider imposes exit charges for 'short' contribution periods (IIRC the Prudential does but Zurich - for example - doesn't), given what you've said about your wife probably becoming a teacher in a few years. That said, even if there is an exit charge, it might not be significant enough to put a prudent person off.

hyubh

jem16 wrote: »

In Scotland there is no limit to the amount paid into AVCs

Ah yes - paragraph 10 of the relevant section of the admin regs (25 for the English & Welsh version, 22 for the Scottish one) is missing:

http://timeline.lge.gov.uk/LGPS2008Regs/SI20121989/20080239.htm
http://timeline.lge.gov.uk/scot/Scotreg09/SSI20120347/20080228.htm

so it really depends on where the OP is situated.

To be fair, you yourself referred to 'post-2008 pension' which would be 'post-2009' for Scotland

FatherAbraham

billchecker1 wrote: »

It then says that at age 65 she would get an annual pension of £9700 and a lump sum grant of £300.

As this seems low is there anyway I can increase this.

Yes, she could make a contract for ARCs (additional regular contributions), to buy additional pension up to an extra £5000.

ARCs can't be paid by lump sum, they are (obviously) paid by regular contribs, taken from salary.

This is an LGPS 2008 feature; some believe that ARC contracts will all be terminated in April 2014, since LGPS 2008 finishes them.

So, if you want to do this at all, you've got to get your skates on, get a quote, get the medical certification to say she's likely to remain in good health for the duration of the contract, and get it in to the pensions department in good time to meet the deadline for the January payroll -- she might be able to make three months of ARCs before the scheme stops, at best.

billchecker1 wrote: »

I know most schemes have stopped AVCs. Does this apply here?

If I can, is it possible to put in £4000 thus making her a non tax payer, or does this type of loophole no longer work?

AVCs were really only important in the bad old days when workers were only allowed to have one pension scheme to contribute to at a time. That nonsense has all gone, now we can contribute to as many pension arrangements as we wish simultaneously.

So, she doesn't need AVCs to get extra pension at commercial rates; she can have a personal pension which she pays into.

The AVC loophole on LGPS 2008 is that the AVC pot is tightly bound to the scheme, and can be used to fund a tax-free lump sum, whilst leaving the main scheme regular distribs untouched.

In Cambridgeshire, the AVC operator Prudential finally realized that everyone was paying in huge lumps in their final year before retirement, getting tax relief, then sucking it out again a few months later -- at tremendous admin cost to the insurer. They introduced a sliding scale of extra charges this past summer, so that AVCs held for less than one year before payout as lump sum are now charged 20%.

Warmest regards,
FA

FatherAbraham

billchecker1 wrote: »

Hi all, am after advice please for the pension provision for the OH who is in the above named local government scheme.

...

If I can, is it possible to put in £4000 thus making her a non tax payer, or does this type of loophole no longer work?

"OH" may be cute slang for something, but it's far more important to be precise about legal relationships when it comes to pensions planning.

Either she's your wife/civil partner or she isn't. The difference is of great consequence, particularly if you're talking about gifting payments into somebody else's pension scheme.

It's unclear what you mean a "loophole" anyway. There's an important principle that a person who reduces his current income by deferring it into his state-approved personal pension arrangement is also able to defer taxation on that income. That's not a loophole.

Becoming a non-taxpayer is not a useful goal in itself. What is it that you want to achieve?

Warmest regards,
FA

billchecker1

FatherAbraham wrote: »

"OH" may be cute slang for something, but it's far more important to be precise about legal relationships when it comes to pensions planning.

Either she's your wife/civil partner or she isn't. The difference is of great consequence, particularly if you're talking about gifting payments into somebody else's pension scheme.

It's unclear what you mean a "loophole" anyway. There's an important principle that a person who reduces his current income by deferring it into his state-approved personal pension arrangement is also able to defer taxation on that income. That's not a loophole.

Becoming a non-taxpayer is not a useful goal in itself. What is it that you want to achieve?

Warmest regards,
FA

She is my wife!

The goal I am trying to acheive is for her to have a higher pension upon retirement.

I am also unsure about the benefits of being a non tax payer. Maybe someone could help me with this?

At the moment i am still uncertain abourt what figures we would gain from AVCs?

Am I correct in saying the 25% amount is based on the final salary. Which could mean that if merged with the teachers pension would mean a nice lump sum of that amount? I say this as her current salary is rather low and will only go up if she becomes a teacher.

OldBeanz

The AVC's linked to the LGPS pension can only be linked with that pension. The teachers' pension scheme does not allow this. Therefore the main benefit of buying an AVC through the LGPS, (most of AVC in cash), would not be of benefit if your wife became a teacher as the AVC would become disaggregated.

atush

Yes, there is an AVC scheme and you would do well to check it out because potentially you could take 100% of it tax free. (although there are some members on this forum who would frown on that..)

I doubt that. the only advice I hear here, is to pay AVCs into the LGPS as it can be used as the TFLS giving you a better higher indexed pension if you need a LS.

Of course, if she moves into the teachers pension she can't use this. But AFAIK, the teachers AVC can be transferred out to a PP or Sipp? Ask Jem perhaps. This is useful if she might want to retire earlier than her scheme age.

And yes there are advantages to her being a non taxpayer (and your wife as opposed to partner) as if you have any unwrapped investments, savings etc that produce an income you can transfer them into her name w/o a tax charge. And therefor save tax on that income.

Bear in mind, if she is limited to 7K in pension contribs, this must include the contribs currently going into her pension.

jem16

hyubh wrote: »

To be fair, you yourself referred to 'post-2008 pension' which would be 'post-2009' for Scotland

Yes I did - most on her seem not to be from Scotland so went along with the English dates.

Is the 50% limit applicable to all English councils?