Can I run a SIPP alongside my LGPS pension?

jamesd

Just to clarify a little, the AVCs under current rules can be used to pay the whole of the 25% lump sum from the whole pot size. And that may incolve using 100% of the AVC money for it.

It's well worth locking in that capability because the normal commutation rate from income to lump sum in public sector schemes is horrendously bad, so bad that it'll almost always be better to borrow to get the lump sum and repay the borrowing out of the full income.

blizeH

Sorry jem, I misread your post - I thought you were referring to ARCs not AVCs. It'd be a very nice option to be able to take the entire AVC as a lump sum, and I know the tax benefits make it a great option, but I think yeah as you said the S&S ISA would probably be a little more flexible (lower fees, Vanguard fund, can use the money when I need to etc) and I think I'll top up my normal pension via ARC to get the tax benefits from that, plus hopefully keep up with inflation.

And thank you james, I did look at the annuity options with the Prudential AVC and wasn't overly impressed so maybe that's another part of what turned me away from AVCs, although like you said if I get in quickly being able to take the entire amount as a lump sum would be a nice option. I still think lots of S&S ISA with a bit of ARC is a nice balance, but I definitely need to give it a bit more thought before committing.

taktikback

don't quite see the logic. As long as you're in for 5 years, what's not to like about AVCs.? Where else do you get full tax relief on the way in and potentially on the way out? ISAs are paid for with taxed money.

OK you need to take the AVC at the same time as your main pension, but that just makes it a very nice tax efficient savings scheme -much better than an ISA. If you really need flexibility you already have the ISA option anyway.

Plus the annuity option is irrelevant - you won't use it for that - it's main use is a tax free smash and grab account...

jem16

taktikback wrote: »

OK you need to take the AVC at the same time as your main pension,

That is the main stumbling block for those that want to retire early. It's a huge actuarial reduction if you want to retire at age 55 instead of 65 and what will become the state pension age.

Ideally both are good but if you have to choose one you have to decide which is better for your circumstances.

blizeH

Yeah I think an AVC is still a great option, but as discussed on the previous page the return probably won't be that much better than an S&S ISA by the time you factor in Prudential's fees, plus it's far less flexible - ideally I'd rather use Vanguard rather than Prudential's own funds, plus like Gem said with an S&S ISA you can access the money at any time should you need to.

In an ideal world of course you'd have all three I guess - ARC, AVC and an S&S ISA (maybe even a SIPP if you have loads of spare cash!) but for me that's just not realistic, I can hopefully max out the ARC by depositing over a good number of years so that will keep in line with RPI, and then for stocks I think I'd be happy with the S&S ISA - that way I will hopefully still have a great pension, but also a little bit of extra cash in the ISA that I can access if needed

Thanks all again for the great advice!

Sobraon

jem16 wrote: »

As others have said even starting one with a small amount keeps your options open.

Jem I may have missed this but do you know if a variation in AVC amounts will be allowed after April '14 (your earlier reply may imply this is possible) or will the 'protection' be lost?

jem16

Sobraon wrote: »

Jem I may have missed this but do you know if a variation in AVC amounts will be allowed after April '14 (your earlier reply may imply this is possible) or will the 'protection' be lost?

No I don't know for sure.

taktikback

blizeH wrote: »

Yeah I think an AVC is still a great option, but as discussed on the previous page the return probably won't be that much better than an S&S ISA by the time you factor in Prudential's fees, plus it's far less flexible - ideally I'd rather use Vanguard rather than Prudential's own funds, plus like Gem said with an S&S ISA you can access the money at any time should you need to.

Why would the return not be much better?. There doesn't have to be much difference between the two plans (ISA/AVC)-you're just potentially selecting different stocks and shares within the wrappers. The difference is the 20% tax break for the AVC -that far outweighs any difference in fees between Prudential and anyone else (S+S ISAs build in fees just like everyone else)

Yes AVCs are less flexible -and that might be deal breaker for you -but then how much are you willing to pay for flexibility that you might not need? Quite a lot it would seem...

(no I'm not a Prudential Salesman -I wouldn't care who was offering the AVC -it's about getting the best deal at the end of the day

blizeH

Thank you, I'm just thinking in the very long term (I'm only 28 now) despite getting a very nice 20% tax break, by the time I hit the age I can actually take it as a lump sum (assuming they don't change it again before then to prevent me from doing so) the Prudential fees would have eaten into the investment so much that maybe just a regular low fee Vanguard fund is a good option.

But I think I may hedge my bets and open an AVC before April anyway, at least then as others have mentioned it keeps my options open.

Also for anyone considering getting an ARC, I've just done some sums based on putting money into ARCs early, or paying over a longer term and putting the rest into the stock market (assuming a 6% return) and the long term ARC won by a considerable amount.

Of course each situation is different so you'll have to factor in your tax situation, but it does seem like paying the ARC over a longer term is a better option.

(edit) also overlooked the chances of losing job/finding another job - so maybe paying earlier isn't such a bad idea!

browneyedbazzi

Sobraon wrote: »

Jem I may have missed this but do you know if a variation in AVC amounts will be allowed after April '14 (your earlier reply may imply this is possible) or will the 'protection' be lost?

I went to a pensions seminar about the changes coming in on 1st April last week and we were told that so long as your contract with Prudential for the AVCs started before 1st of April you retain all the rights of the current scheme for the total you pay in - including the 100% tax free lump sum and the flexibility in terms of what you pay in.

I specifically asked this question as I was thinking about starting an AVC with a smallish amount of money now with the intention to increase it when I have a bit more money. I figured it wasn't worth rushing to do if the protection only applied to funds paid in before 1st April or if changing the amount paid in later would amount to a new contract and therefore mean the protection ceased from that point. I was quite pleased to hear the protection stays!