Unlikely to get close to qualifying for pension, best options?

nicholbb

Lungboy,
Getting morbid here. My LGPS offers 3 x salary death in service and there is also a partner pension which might help.
There is a deceleration you need to fill in else it can get complex, HR have this form to pass on or can send direct.

good luck with a transplant or technological improvement.

Lungboy

I have already filled in the declaration for my wife to receive my death-in-service money, but thanks for the heads up.

I went to a pension meeting yesterday by a chap from the Prudential. I realise he was there to essentially sell his product, but AVCs really do sound like a tax efficient way to save money. In theory I still have 30 years left to (current) SP age, which could add up to a huge chunk of cash for a relatively small monthly contribution. Am I missing some obvious downsides that he might not have been forthcoming about?

sandsy

Lungboy wrote: »

I have already filled in the declaration for my wife to receive my death-in-service money, but thanks for the heads up.

I went to a pension meeting yesterday by a chap from the Prudential. I realise he was there to essentially sell his product, but AVCs really do sound like a tax efficient way to save money. In theory I still have 30 years left to (current) SP age, which could add up to a huge chunk of cash for a relatively small monthly contribution. Am I missing some obvious downsides that he might not have been forthcoming about?

He might not have mentioned that the huge chunk of money might only be worth about half its value, if inflation is taken into account.

greenglide

AVCs really do sound like a tax efficient way to save money

AVCs can be a very good deal but equally can be a poor deal.

The win in DB schemes which allow the AVCs to fund a PCLS where otherwise the PCLS would decrease the monthly payments made. They are also brilliant where the contributions are via Salary Sacrifice.

However must schemes tie the taking of AVCs to the taking of the main scheme benefits which isnt much use if you want to use the money to fund a gap between early retirement and the start of the main scheme benefits.

People tend to assume that AVCs must be good because they are part of the pension scheme but you need to look carefully to see what the real value is.

Lungboy

From what I understand, and I could well be wrong, the Prudential avc is taken pretax which I assume means it's salary sacrifice. The chap also said that one of the main benefits of this avc is that you could collect it but not your LGPS pension allowing the LGPS to accrue more years before taking it to prevent any dip in income

greenglide

the Prudential avc is taken pretax which I assume means it's salary sacrifice

Taken "pretax" normally just means that you get tax relief but you would still pay NI on it. Salary Sacrifice means that the contributions are actually paid by the employer as Employer Contributions which means that you dont pay NI on them.

Public Sector does not, normally, use Salary Sacrifice but whether this is the case for LGPS, I dont know.

Care must be taken with pretax contributions if your pay is low (part time) or the contributions are very high. If you dont pay any tax on your earnings you will not get tax relief while if the contributions are post tax (so come off the net pay) or you pay into a personal pension instead you get the tax relief added by the pension provider even if you havent paid any.

Neasy

I believe that the LGPS AVC can only be taken 100% tax free if taken at the same time as your main pension - https://www.pru.co.uk/rz/localgov/england-wales/avcs/taking-your-benefits/

Lungboy

I think it's totally tax free if it's less than a quarter of your overall pension pot? I might be getting different bits muddled though. I know you can take it in chunks,.with 25% of each chunk tax free with the idea of getting the rest of your chunk under the tax threshold.

Lungboy

Has there been any rumblings about upping the number of years needed to qualify for full state pension? I finally sorted access to the .gov website to check my state pension details. I currently have 7 years, and will have another for 16/17, so 8 years at age 37. I'd hate to miss out if they up it to 40 and I could buy 2 more years for a total of £891.

I'm still totally confused as to which way to go for the best results. AVC vs LISA vs SIPP vs s&s ISA, they all have benefits and drawbacks. I think I've ruled out buying any additional pension from my LGPS scheme as if I were forced to retire early due to ill health that would be actuarily reduced where the other options wouldn't.

molerat

There has not been anything about increasing SP contribution years .......... yet ! .................... but who knows what will happen in the future especially as you are looking 30 years away. Purchasing pre 2016 years is not clear cut being in a contracted out scheme, you would need to post up the full numbers from your forecast - current actual amount, number of full years and COPE..