Local Government Pension Help

Technaut

Hi Folks,

Some time ago I stupidly decided to opt out of the Local Government Pension scheme operated by the local authority that i work for (I was 17 at the time and very, very dumb).

Some time later I realised the error of my ways and opted back in and started making contributions which is good but I missed out on a good few years of contributions.

I was reading some stuff sent through from the LGPS and I came across text regarding AVC's and purchasing additional years.

I was going to go down the road of purchasing additional years to make up for the ones i lost - LGPS is based on your final salary times the amount of years so that seemed to make sense but when I mentioned this to a guy at work the other day he said I would be better off with AVC's?

Which is best, can I do both? Help please!

jem16

The additional years is always best although will be dearer than AVCs.

If you are going to do it best hurry up as the Teachers' Pension scheme has already removed the ability to purchase additional years and I believe the LGPS is to follow suit (if it hasn't already done so).

Technaut

Thanks for your comments. I wrote to them about purchasing additional years about a month ago and I think I have to wait until nearer my next birthday before going for a medical. Need to dig the letter out when I get home tonight and see exactly what it says.
Can you do both AVC’s and purchase additional years?

jem16

I don't know if you can or not.

However I don't really see the point of buying AVCs if you are buying additional years.

Andy_L

Generally, with FS schemes, if you can get the full years of service (40 in the LGPS iirc) before the normal retiremnt age you can't buy added years, so if you started at 17 you probably can't buy any extra years

With the LGPS you can use the full value of AVCs to fund extra lump sum rather than sacraficing pension at an ungenerous 1/12 rate

jem16

Andy_L wrote: »

Generally, with FS schemes, if you can get the full years of service (40 in the LGPS iirc) before the normal retiremnt age you can't buy added years, so if you started at 17 you probably can't buy any extra years

The OP said he opted out of the LGPS at age 17 and opted back in later having realised the error of his ways.

Some time later I realised the error of my ways and opted back in and started making contributions which is good but I missed out on a good few years of contributions.

Technaut

jem16 wrote: »

I don't know if you can or not.

However I don't really see the point of buying AVCs if you are buying additional years.

A guy at work mentioned that I should do both. I wasnt really sure what the benefits would be either but he seems like he knows his stuff so I thought I would investigate further

dunstonh

A guy at work mentioned that I should do both. I wasnt really sure what the benefits would be either but he seems like he knows his stuff so I thought I would investigate further

Is he a pensions adviser or does he read the daily mail? No offence meant by that but there are so many myths and so much internal misinformation in work places that I wouldnt believe half what you are told from employees about work benefits. Most occupational pension schemes and associated benefits are misunderstood.

AVCs have gone from being one of the best options (where added years is not an option) to being one of the worst. Stakeholder, personal pension and SIPPs are now better than most AVCs. You also have ISAs to consider.

Where an AVC has added contributions from employer or can perhaps enhance the lump sum benefit (where you can take more than 25% on the AVC due to scheme rules) then AVCs are valid option to consider. Where that doesnt exist, then the AVC is restrictive and usually has poor investment options by modern standards.

jamesd

Until last year you couldn't have a personal pension as well as a workplace pension, so if you wanted more pension than just the years could buy you had to use AVCs. Today you can use personal pensions or a stocks and shares ISA instead and those two options generally beat AVCs today. It's possible that the person at work isn't taking into account the A-day change that allows you to have both work and personal pensions.