LGPS advice please

Nual

Hello again,

I have been paying into Prudential AVCs alongside my LG pension for a couple of years, originally intending to add to my pre 2008 tfls on retirement. It is possible my job will be made redundant in 2016 and I have been trying to work out my position if that happens.

On the LGPS website there is a calculator for buying extra pension, apparently brought in alongside the career average 2014 scheme.

Questions
1. Is it possible to use my AVC pot plus potential redundancy payment as a lump sum to buy extra pension when i am made redundant?
2. Would it be better to start buying extra pension now and stop paying in to AVC ?

Many thanks for any guidance

saver861

Well there is a limit to how much AVC's you can take in cash as your overall pension pot so I'd clarify that first off.

I was in a similar situation and I was in LGPS, and my recollection was that you could use some of your AVC's to buy more LGPS pension years. I can't recall the detail but in my case I looked into it and decided it was not a runner for my circumstances.

If you stop paying into the AVC you will lose the tax benefit of doing so of course.

One thing, when it was clear there was a chance for me to take early retirement, I moved all my AVC fund into the Prudential Deposit fund. There was virtually no growth but it removed the risk of a market crash and my AVC fund being slashed. My AVC was in the Deposit Fund for about two years prior to my retirement and there was no crash, so I lost a little on it. However, for me, it was a price worth paying for the security of knowing the fund was safe.

seven-day-weekend

I paid for two extra LGPS years with my AVCs. This was twelve years ago.

Drp8713

From what you have said you should be able to take all of your AVC as tax free cash.

You will have the option to buy additional pension with the AVC fund, however the amount of pension you get is based on age related factors, so whether that is a good option may depend on if you are being made redundant at 55 or 65.

You cant buy pension with your redundancy payment as by the time you get it you won't be in the scheme any more.

System

Hi

The situation is

You are entitled to 25% as a tax free lump sum.

Part of this 25% is taken by the automatic 3/80 ths Lump Sum.

The remainder of the 25% can remain unused, or filled by your AVC, even reduce your pension to make full use of your entitlement.

Your AVC pot is cash and if you are below the threshold it can be taken tax free, or buy an annuity from the LPGS, even go and OMO it (Open Market Option) to see what you can get in terms of an annuity.

If you choose to load your LGPS pension with all the options, the payback period is, at my guess, around 18 years. So during a long life it may be suitable.

If in doubt please ask.

pandora205

I made an enquiry recently about using my AVC pot to buy additional pension and the response from our LA was that as I was not contributing in 2001 this option was not open to me.

If this is incorrect, could someone clarify please so I can enquire further. (I've booked a session with their officer to go through my options regarding AVCs on retirement).

Thanks

System

Hi

http://www.pru.co.uk/rz/localgov/england-wales/avcs/


Main benefits

AVCs allow you more financial control and more choice over how you spend your time in retirement.
AVCs give you more control and choice

• Retire early and use AVCs to help make up any reduction in your LGPS benefits.
• Use AVCs to buy additional LGPS benefits - increase your main scheme guaranteed index linked pension.
• Take up to 25% of your AVC pot as tax free cash and use the rest to buy an additional taxable pension income. Important - you must read this information regarding 25% tax-free cash.
• Use all of your AVCs to buy an additional taxable pension income.

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What happens when I retire?

At retirement, your fund can be used to buy a pension from Standard Life or another life assurance company of your choosing. You will also have the option of converting your AVC fund to additional pension in the Local Government Pension Scheme.
For further information visit the Standard Life website (user ID is LGPS) or call 0845 279 8831.


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So you might want to talk to someone about this. Which LA?

Drp8713

pandora205 wrote: »

I made an enquiry recently about using my AVC pot to buy additional pension and the response from our LA was that as I was not contributing in 2001 this option was not open to me.

If this is incorrect, could someone clarify please so I can enquire further. (I've booked a session with their officer to go through my options regarding AVCs on retirement).

Thanks

Either you or the administrator are confusing added years and added pension.


You can only buy added years with the AVC if you were paying into it prior to 13th November 2001

pandora205

Ah thanks, maybe that is still an option then. The exact phrasing in the response from the administrator was:

As you commenced payment of your AVCs after 2001 you do not have the option to use your AVCs to buy service in the scheme, however the options you have can be discussed at your meeting.