LGPS; new APC

Wentthedaywell?

I’d appreciate any help with APCs please. I’m finding it difficult to find much info on the details.

I am 60 in September, I will have been in the LGPS 37 years and have ringfenced (2008) and tapered protections (approx. 2.25% reduction until April 2020, then it jumps to about 16%). I will get my lump sum and AVC under the old system where I can take 100% as tax free lump sums, both totalling approx. £88k. I may flexibly retire at 60 taking all elements of my pension to date and work another few years on half current pay.

I was wondering whether to put some of that cash into an APC at the point of retiring flexibly, when I will no longer be paying to a maxed out AVC. £20k will give me £1341p.a (before reduction). My queries are:

1. Is this a good deal or not?
2. Are there any advantages to paying a lump sum or to monthly payments?
3. Can I use some of my tax free AVC/lump sum to pay for a APC as a one off payment?
4. Can I make lump sums each year, up to some maximum, or is it a one off?
5. If I decide to continue to flexibly work once the 16% reduction kicks in, will the reduction only apply to the post April 20, not the part Sept 17-April 20?
6. Can I defer the Sept 17 to full-retirement pension, including the APC contribution part, till SPA and would this avoid any deductions at all?

Thank you.

Apodemus

My understanding is that you might fall foul of the recycling rules if you tried to use your lump sum to make an APC payment. You might be better to start a payment scheme before taking your early retiral, so that it can clearly be shown as being a separate stream of payment. Others on here are much more knowledgeable about this than me.

I also intend to retire at 60 and will look at the maths at that time to compare deferring taking my LGPS pension until my state pension age (at 66) versus the actuarial reduction that I would have at 60.

You can make a series of lump sum APC payments or set up a monthly payment from your pay cheque - the latter appears to be very much more common than the former.

There is a maximum of extra pension that you can buy, set at £6,500 at the moment, I think. Remember that the cost per £1,000 of extra pension rises with each birthday. I am currently wondering how to manage an additional payment in the new tax year (from April 6th) but before my birthday the following week!

Wentthedaywell?

Thanks Apodemus.

Would using other money already in a savings account not count as recycling? Presumably paying monthly gets over this recycling issue.

Is there a maximum you can pay in pm/pa as well as the total pension sum of £6500 over all?

I'm maxed out on my AVC, paying the max allowed 50% of my salary to get the biggest cash sum I can. Is a APC allowance on top of that ? If not I can't set one up before flexible retirement.

Wentthedaywell?

Just to clarify, the £1321 is before tax (I'm a 20% tax payer). Do people consider this a good deal or not?

Apodemus

Wentthedaywell? wrote: »

Just to clarify, the £1321 is before tax (I'm a 20% tax payer). Do people consider this a good deal or not?

You might be interested in the thread I posted on this last week: http://https://forums.moneysavingexpert.com/discussion/5611295

kidmugsy

Wentthedaywell? wrote: »

Would using other money already in a savings account not count as recycling?

It certainly would have done when I last looked into this. Nor would monthly payments have got you off the hook.

AlanP_2

Wentthedaywell? wrote: »

I'm maxed out on my AVC, paying the max allowed 50% of my salary to get the biggest cash sum I can. Is a APC allowance on top of that ? If not I can't set one up before flexible retirement.

Under the 2014 scheme the 50% of salary restriction has been removed I think.

Can you stop contributing to the current AVC and then open a new one with an alternative provider (my county offers 2 AVC providers) and increase your overall AVC pot if you prefer that route to APCs?

Not sure whether you can as I guess the administrators might only allow one AVC alongside the main LGPS but might be worth investigating.

Wentthedaywell?

Thanks Alan. I feel I will have enough cash (not that you can ever have too much!) with my existing savings, lump sum and AVC, plus a S&S ISA. With savings interest so low, I was looking at other options, hence considering the APC to diversify and to boost up my monthly income instead.

Wentthedaywell?

Any more opinions/help please?

AlanP_2

You haven't mentioned a spouse or partner and do talk about "my income" so this may not be relevant.

If there is a Significant Other look at the pension planning in the round and consider making best use of available tax allowances and what the situation would be for the survivor as (when) one of you passes away.

As I say may not be relevant but we see quite a few people on here where the retirement income is very heavily weighted towards one person.

Wentthedaywell?

I'm single, so not bothered with not having survivor's benefit to any APC.

From what I've read today, I think APC contributions out of monthly salary are not considered recycled by HMRC, but a lump sum, even if it comes out of a completely different savings account, is deemed to be.