LGPS - should I put all my savings in a AVC?

atush

Wentthedaywell? wrote: »

I haven't thought what to do when I get it - I was expecting take it as cash as put it in a S&S ISA. I haven't thought of drawdown. Is this better than cash at the time of retirement?

I still have a ring-fenced LGPS lump sum and wasn't planning to commute any more, so the AVC is for extra cash. I opened it March 2014 so I understand I can take it all as cash.

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Taking it all as cash in year one is not a good idea. 25% of your pot will be tax free, but the remaining will be taxed as if it were income. So taking it more slowly, so that some falls w/in PA if possible, and if not taking it so you dont cross over into HRT is best.

It is hard enough paying BRT tax on your pension, you dont want to be handing over 40% of it to the taxman?

Regardless of the rate you take it, a S&S isa is a good place for some of it, or even all of it if you have a large cash fund elsewhere.

I personally rec you need at least 2x yearly living expenses in cash, so that when you need funds you are not a 'forced seller' during any downturn.

Wentthedaywell?

Thanks everybody, it's getting a little clearer. I'm confused with this though:

atush wrote: »

Taking it all as cash in year one is not a good idea. 25% of your pot will be tax free, but the remaining will be taxed as if it were income. So taking it more slowly, so that some falls w/in PA if possible, and if not taking it so you dont cross over into HRT is best.

It is hard enough paying BRT tax on your pension, you dont want to be handing over 40% of it to the taxman?

I thought I could take all the lump sum built up before 2008 as 100% tax free. Also that my AVC (having opened it before April 2014) is also available as a 100% tax free cash sum but I have to take this at the time I draw my LGP . Is this not the case?

bitofatit

Wentthedaywell? wrote: »

I still have a ring-fenced LGPS lump sum and wasn't planning to commute any more, so the AVC is for extra cash. I opened it March 2014 so I understand I can take it all as cash.

I may have picked this up incorrectly BUT are you thinking of commuting some of your LGPS??!! You don't have to commute any of that (assuming your AVC is sufficiently large that it covers 25% of your total LGPS and AVC pot.

I did this myself recently - don't want to commute yr Pension when all the cash can come out of your AVC. The Balance of your AVC (hopefully under the new rules - post April 2015 can be used in some kind of drawdown arrangement Or you can transfer it all into LGPS and increase the LGPS). Happy days in deciding - LGPS haven't made their mind up yet what happens Post April 2015.

Triumph13

Wentthedaywell? wrote: »

Thanks everybody, it's getting a little clearer. I'm confused with this though:



I thought I could take all the lump sum built up before 2008 as 100% tax free. Also that my AVC (having opened it before April 2014) is also available as a 100% tax free cash sum but I have to take this at the time I draw my LGP . Is this not the case?

That is correct. I think atush was just confusing you with one of the hordes who turn up here announcing their plan to cash in their full pension scheme on the back of the upcoming changes. Your plans to take your LGPS AVCs and your fixed lump sum out tax free in one go when you retire (and not to commute any of your DB benefits) are entirely commendable.

bitofatit

Wentthedaywell? wrote: »

I've got a AVC, opened last year (under the old system where I can take 100% as cash) and currently pay £750 gross p.m. This is a SL 50:50 split between Balanced Lifestyle and a with-profits (I don’t know if this is a good mix, but was in a rush to get in before April).

I want to save another £300-400 pm.

Just to be clear on the 100% - you can take this all as cash from the AVC. But - bearing in mind the rate you will may be saving from your salary you may build up a relatively substantial pot from your AVC. You can take it all as cash IF the value of the fund + LGPS Pension benefits does not exceed 25% of the overall pot. In the happy situation that your AVC savings + returns are greater than that the residual over that amount can't be take as cash and need to invested towards an income to supplement your pension.

Wentthedaywell?

bitofatit wrote: »

Just to be clear on the 100% - you can take this all as cash from the AVC. But - bearing in mind the rate you will may be saving from your salary you may build up a relatively substantial pot from your AVC. You can take it all as cash IF the value of the fund + LGPS Pension benefits does not exceed 25% of the overall pot. In the happy situation that your AVC savings + returns are greater than that the residual over that amount can't be take as cash and need to invested towards an income to supplement your pension.

So AVC + LGPS lump sum must not exceed 25% of my LGPS pot plus AVC.
How do I know the value of my LGPS pot, as I am on a defined benefit scheme so never get to see its value, just the final pension estimate?

Triumph13

Multiply the pension by 20.

So if the pension was going to be say £15k a year and your lump sum plus AVCs were up to £100k you could take them all tax free (15 x 20 = 300 add the 100 to get 400 of which 25% = 100 can be tax fee)

atush

But if the AVC is higher than 25% of total pot- you can't.

Wentthedaywell?

Thanks everybody, you've all been very patient and very helpful and things are a lot clearer now.

Next step - I must decide whether I'm happy with the funds!...