Getting nearer!!

okydoky

My wife intends giving up work in April next year, she has been in LGPS for the last eleven years(part-time) and has built up pension entitlement of about £2800pa at age 66.

She will be almost 61 when she stops working and has been contributing heavily to her SIPP over the last few years to bridge the gap. Current value of £62K with next years contribution and a bit of growth, should be c.£75, intention being to take 25% tax free lump sum and then up to her personal allowance each year. She will continue to pay in £2880 net and if there is anything left when state pension and LGPS pension kicks in, she will draw enough to take her up to the personal allowance - her State Pension forecast is about £8300pa.

We have tried to make her situation as tax efficient as possible - I am already retired with my own SIPP and we have reasonable S and S ISA’s

Is there anything else we need to think about whilst she is still in employment?

Thanks in anticipation

robin61

The Government is planning to raise the ‘personal allowance’ – the amount of money you can earn before being taxed from £11,500 to £11,850 from April 2018.
So as you've said it's a good idea to both have an income and take full advantage if you can.
If your wife's income is going to be under that before she gets her State Pension the marriage allowance means she can transfer 10% of her personal allowance to you as long as you are not a higher-rate or additional-rate taxpayer. So that will help if your income is going to be over the personal allowance.

Linton

I believe with LGPS that any money in an AVC can be used to fund the tax free lump sum from the DB pension thus leaving more for ongoing income. So it could be advantageous to put money into an AVC rather than a SIPP.

Does she have the option of lesser lump sum for extra pension?

okydoky

Thanks Linton - the LGPS scheme has a very small lump sum so not an option really.

We did look at the AVC options a few years back but the SIPP options and flexibility were better suited to her circumstances and we will need to work with these options now as her retirement is not far off!

To be honest, the Investments chosen within her SIPP have performed very well and we are happy with the options available to us and leaving the LGPS until normal retirement date.

kidmugsy

okydoky wrote: »

... if there is anything left when state pension and LGPS pension kicks in, she will draw enough to take her up to the personal allowance - her State Pension forecast is about £8300pa.

When LGPS and State Retirement Pension are imminent, and if she has a decent sum left in her SIPP, she might consider deferring the SRP for a while to let her drawdown the last of her SIPP tax-efficiently. Then when she does start her SRP it will be bigger by 5.2% for each year of deferral. I think that deferral for new-style SRPs is usually a pretty feeble deal. But by avoiding some income tax it becomes an attractive way to purchase a little more inflation-protected pension.

Depending on your circumstances you could consider deferral too. If by any chance you have the old-style SRP you probably ought to consider it: it's a good deal for most such people.

Afterthought:

okydoky wrote: »

Is there anything else we need to think about whilst she is still in employment?

Ask yourselves whether there's a case for borrowing money to fund any saving/investing ideas that have occurred to you but that you have rejected for lack of capital. It's easier to borrow while still in employment. For example, would she like to seize the chance to bung more into her SIPP (or yours)?

okydoky

kidmugsy wrote: »

When LGPS and State Retirement Pension are imminent, and if she has a decent sum left in her SIPP, she might consider deferring the SRP for a while to let her drawdown the last of her SIPP tax-efficiently. Then when she does start her SRP it will be bigger by 5.2% for each year of deferral. I think that deferral for new-style SRPs is usually a pretty feeble deal. But by avoiding some income tax it becomes an attractive way to purchase a little more inflation-protected Pension.

Yes that’s a really good idea - I did consider it as an option if funds permit!

kidmugsy wrote: »

Depending on your circumstances you could consider deferral too. If by any chance you have the old-style SRP you probably ought to consider it: it's a good deal for most such people.

Afterthought:

Ask yourselves whether there's a case for borrowing money to fund any saving/investing ideas that have occurred to you but that you have rejected for lack of capital. It's easier to borrow while still in employment. For example, would she like to seize the chance to bung more into her SIPP (or yours)?

Yes I am intending to defer by possibly two years - I am two years older and this would boost my only DB pension by about 11% which makes sense.
As far as SIPP contributions are concerned, we are already maxing out on these!!

Thanks for the ideas though.

enthusiasticsaver

She should look into either buying added years which you can do with the LGPS or the Prudential AVCs.

okydoky

enthusiasticsaver wrote: »

She should look into either buying added years which you can do with the LGPS or the Prudential AVCs.

She is already maxing our on SIPP contributions so the AVC option is a non starter?
Ditto adding years under LGPS, or are we missing something?