Lump sum payment to DB scheme.

Apodemus

My wife and I are both LGPS members. We can each buy additional pension from the scheme at a cost of £12,513 for £1,000 additional pension. Basic rate tax relief will bring that down to about £10k actual cost. Additional pension is CPI linked but has no spouse benefits.

So, at £10k net cost per £1k benefit, is it a good deal? Looks good to me and gives me certainty to balance against a DC scheme and share investments. Any downsides I need to consider?

OldBeanz

Only the perpetual moaning by those who do not have access to such a good deal

AlanP_2

Will you need the additional £1k a year pension?

I'm in the LGPS as is my OH and have also looked at this option but decided against it as the annual pension we will get from the 2 * LGPS and a private sector deferred DB I have will give us a comfortable "baseline" income with SP on top at some stage.

Instead we have opted for the AVC option as the ability to take that as a tax free lump sum seemed a better option to us and our circumstances

Apodemus

AlanP wrote: »

Will you need the additional £1k a year pension?

Short answer is yes. We are both late arrivals to local government employment.

Wife will be £2k short of target at SP age when adding together LGPS and SP.

My situation is more complex, but current projection is that I will only meet about 60% of target from LGPS + older DC scheme + SP. I should have sufficient investments for this not to be a problem, but (with 8 years remaining to SP age) I reckon it would be better to transfer as much as possible to SIPP and LGPS. Just trying to work out best balance between the two and get over my inherent reluctance to locking it all away!

Apodemus

OldBeanz wrote: »

Only the perpetual moaning by those who do not have access to such a good deal

Thanks! It does seem a good deal, but strangely, this option seems to be very rarely taken up! My scheme organisers had to look up the rules as they hadn't actually come across anyone wanting to do this before - which is why I am wondering what I am missing!

Acquinas

A return based on 12ths before tax and 10ths after tax sounds good, i.e. effective rates of return of 8.3% or 10% sound almost too good to be true, though I think that you would find that if you left before NRA, the rate would be reduced. LGPS normally pays out without actuarial reduction if you are made redundant after 55, but only on the core entitlement, whereas entitlement based on APs would be actuarially reduced I think. So I would say go ahead provided you are in it for the long haul.