Attraction of APCs

Molotov

I have the option of paying additional pension contributions at a gross cost of £31.80 per month for 3 years for £100 of extra pension (cpi linked).

I'm a 52 year old male basic rate taxpayer.

I appreciate that direct comparison with defined contribution schemes like AVCs or personal pensions isn't possible, but does anybody think this APC is particularly good or particularly poor value for money?

In the past I made ARCs under a previous scheme and the current APCs aren't as good value as they were, but still doesn't seem too bad to me given that I don't wish to increase my AVCs or SIPP contributions.

For the record, I don't drink, don't smoke, don't have a black cat or walk under ladders and fully intend to live a long and happy life.

MK62

Quick check - so you will pay a total of £1145 (£31.80x12x3), and in return, at age 55, you will receive a CPI linked extra pension of £100 per year for life?


If that's the case, I would snap their hand off (after first checking that's the maximum you can do).


Or is the £100 not payable at 55?

hyubh

MK62 wrote: »

Or is the £100 not payable at 55?

Normal Pension Age for APCs is the same as the main, CARE LGPS pension, so SPA.

MK62

hyubh wrote: »

Normal Pension Age for APCs is the same as the main, CARE LGPS pension, so SPA.

Yes, but like many pensions it's payable at 55, that's why I asked.....I wondered why pay the APC for just 3 years from 52.........I thought it sounded a little too good to be true.....

Molotov

MK62 wrote: »

Quick check - so you will pay a total of £1145 (£31.80x12x3), and in return, at age 55, you will receive a CPI linked extra pension of £100 per year for life?


If that's the case, I would snap their hand off (after first checking that's the maximum you can do).


Or is the £100 not payable at 55?

Your figures are correct, but unfortunately it's not payable at 55, but my normal retirement age of 67.

So maybe I'll just give them a little nibble instead.

hyubh

MK62 wrote: »

Yes, but like many pensions it's payable at 55, that's why I asked.

The APC pension is added to the CARE pension, and is taken at the same time; if that is earlier than the CARE NPA, then an actuarial reduction applies, if later, an actuarial increase. The APC pension also revalues and increases at the same rate as the CARE pension, though it doesn't earn survivor benefits.

greatkingrat

If you were to put 31.80 into a separate pension scheme for 36 months, then assuming 4% growth you would have about £1950 at 67. 4% drawdown would then give you about £78 per year.

So if you have the money spare, making the additional contributions and getting a guaranteed £100 per year at retirement is good value.

Molotov

greatkingrat wrote: »

If you were to put 31.80 into a separate pension scheme for 36 months, then assuming 4% growth you would have about £1950 at 67. 4% drawdown would then give you about £78 per year.

So if you have the money spare, making the additional contributions and getting a guaranteed £100 per year at retirement is good value.

Thanks Great King Rat. That explanation makes a lot of sense.

Plus that £100 pension is index linked which I guess makes it even better value.