paying extra into pension

Nickynoo1

Hi,
I have a LGPS which i've been paying into for 2 years. I'm already 42 so am thinking I should probably make extra provisions.


The trouble is I don't really know what questions I should be finding the answers to. Is it ever a bad idea to pay into the same pension or should I spread savings around a little?


How can I find out what difference my extra contributions would make? I've no idea how much extra I should put away.


I'm just starting this education into pensions so any help appreciated.
Thanks

Thrugelmir

Somewhere to start.

http://www.lgps2014.org/content/how-do-i-buy-extra-or-lost-pension

atush

You have a few options, buying added pension, added years, or AVCs.

or if you intend to retire before scheme age, a personal pension.

hyubh

atush wrote: »

You have a few options, buying added pension, added years, or AVCs.

Added pension ('APC') yes, AVC yes, added years no.

or if you intend to retire before scheme age, a personal pension.

Or even on scheme age...

hyubh

The trouble is I don't really know what questions I should be finding the answers to. Is it ever a bad idea to pay into the same pension or should I spread savings around a little?

APC - if you're a part timer or won't be long in the scheme then purchasing an APC may be a good idea purely to build up your low-risk DB benefits. Otherwise, keep in mind the cost will reflect zero employer contribution, unlike your main benefits in the scheme. Moreover, a normal APC doesn't buy you additional spousal benefits, just additional main pension.

AVC - assuming you're in England or Wales, an AVC over a personal pension has the slight benefit of its proceeds on retirement being usable to buy an APC with spousal benefits. On the other hand an AVC will be less flexible than a personal pension, with less investment choice.

Personal pension - more flexibility, and you would be able to keep contributing if you left the LGPS; on the other hand, tax relief works slightly differently - APC or AVC contributions in the LGPS reduce your taxable income, whereas with a personal pension your contributions will be made from your taxable income and get 'topped up' the government to make up for the fact (if you're a higher-rate taxpayer it's a bit more complicated, but not much more).