Can I run a SIPP alongside my LGPS pension?

woolly_wombat

blizeH wrote: »

Sorry for the silly question, but do you have any information regarding ARCs with the LGPS scheme please? I can't find anything online

A list of all the LGPS Government Actuary's Department (GAD) Guidance with effect from 1 April 2008 can be found here:
http://timeline.lge.gov.uk/GAD/gadidx2008.htm

The link for GAD rules re purchase of additional pensions (via ARCs) on or after 1 April 2012 is here:
http://timeline.lge.gov.uk/GAD/EW_ARCfactors_v1_010412.pdf

Be aware that if you decide to go down the ARC route then your employer could insist on a medical, which could delay things. See this post from gardenia101:
https://forums.moneysavingexpert.com/discussion/comment/63235620#Comment_63235620

WW

FatherAbraham

woolly_wombat wrote: »

Be aware that if you decide to go down the ARC route then your employer could insist on a medical, which could delay things

Yes, that 's precisely why the OP should ask for a quote today, and simultaneously make a doctor's appointment for the medical. Neither commits one to proceeding, but not getitng things moving ASAP reduces the chances of success markedly.

Warmest regards,
FA

blizeH

Thank you so much all for the replies, the ARCs seem like a good option, but the AVCs with Prudential are seemingly even better... I haven't investigated it fully, but it seems like I can potentially make contributions direct from my salary, throw it into a Vanguard fund, and then still have the possibility to take it all as a lump sum if I want.

Struggling to see any negative to that... feel like I'm overlooking something

(edit) looks like I'm limited to the Prudential funds, but still very nice to effectively get a 20% boost on anything I put in.

I guess the main question is whether or not the Prudential fees over time will eat into the investment enough to make it a bad one.

FatherAbraham

blizeH wrote: »

looks like I'm limited to the Prudential funds, but still very nice to effectively get a 20% boost on anything I put in.

Of course, you mean a 25% boost.

blizeH wrote: »

I guess the main question is whether or not the Prudential fees over time will eat into the investment enough to make it a bad one.

Is it? The Prudential fees for Cambridgeshire and Northampton LGPS are 0.75% p.a. on standard funds. With a 25% tax-relief uplift, you'd need a thirty-year period with zero rela growth to lose. This sounds like something not to lose too much sleep over. Even with the special super-charge for one-year-to-retirement AVC contracts at 20%, one just pays into the cash fund and still makes a 5% gain.

I'd suggest the main quesiton is whether you can afford to make big enough contribs to get the maximum benefit.

Warmest regards,
FA

woolly_wombat

blizeH wrote: »

Thank you so much all for the replies, the ARCs seem like a good option, but the AVCs with Prudential are seemingly even better... I haven't investigated it fully, but it seems like I can potentially make contributions direct from my salary, throw it into a Vanguard fund, and then still have the possibility to take it all as a lump sum if I want.

Struggling to see any negative to that... feel like I'm overlooking something

(edit) looks like I'm limited to the Prudential funds, but still very nice to effectively get a 20% boost on anything I put in.

I guess the main question is whether or not the Prudential fees over time will eat into the investment enough to make it a bad one.

Would you be able to access your AVC before 65?

WW

blizeH

Many thanks for the info, please pardon my ignorance but why is it 25% relief rather than the basic tax amount of 20%?

And thanks, I'm 28 so likely would be investing close to a 30 year period - so I think a SIPP with Vanguard could return a similar amount? Plus is possibly slightly more flexible?

(edit) thanks Wombat, didn't think to check that, looks like there is no option at all to take the AVC before the age of 60. In an ideal world I'd like to retire around 10 years before that, though I'm not sure how realistic that is right now.

jamesd

Say you end up with £10,000 in a pension pot. At basic rate you're entitled to £2,000 of relief. To get £10,000 into a pension pot you'd pay in £8,000. £2,000 is 25% of £8,000 or 20% of £10,000.

blizeH

Oh, I see! Thank you very much james.

To be honest I think either an ARC or an AVC would be suitable, but it's hard to pick between them... I think the AVC will potentially have a higher return overall, but the ARC seems like a better overall package since it's actually part of the LGPS pension rather than going through Prudential, plus I can potentially take it 5 years earlier...

jamesd

ARC is added guaranteed money and the usual cost of living increases, both until retirement age and after. I suggest that you buy the maximum possible amount of ARC while you can, including using savings and 0% credit card borrowing. While the ARC price varies, I don't think I've yet seen a case where maximising ARC looked like a bad idea for a person in normal good health.

The reason I mention savings and borrowing is that in the short term you might want to do some buying with a lump sum and have a lower amount purchased with regular payments, to ensure that you won't have any difficulty with the regular payment level.

You can do the S&S ISA and personal pension or AVC later, since there's no prospect of a ban on using them. Get the ARC while you can.

blizeH

Thank you very much james, I'm currently thinking the best solution could be to try to max out the ARC if possible so I'll get the full £5k (will be £185p/m for the next 30 years) and then if I do have any excess cash to put away, I'll stick it into the S&S ISA with Vanguard funds.

I'm guessing with ARCs there is no real benefit to paying earlier, I notice the payments go up drastically if you pay over 30 years as opposed to paying the same amount over 10 years, but I suppose that's just the way the compounding of the investment works?