Lgps Avc

merlin321

The Op has been paying £1000/ month into a pru Avc, through her local gov pension. We assumed it would only cost her £800 after tax relief. However it seems that all that has happened is that she no longer pays any tax, which on her £1550 monthly salary is only around £90.
She has checked with HR dept and this is correct!
Would she not be better off paying into a Sipp that would automatically give her the 20% boost?

xylophone

https://www.pru.co.uk/rz/localgov/avcs/#about

Your AVCs are taken from your pay before tax. Any money you would normally pay as income tax automatically goes into your AVC pot instead as you can see below. If you pay tax at a higher rate, your tax savings will be higher. If you don't pay tax, you won't benefit from tax savings.

xylophone

LGPS operates "net pay" - see

https://www.gov.uk/workplace-pensions/managing-your-pension

merlin321

Many thanks for reply, It does seem that the pension system favours higher earners. Particularly higher tax payers. For instance pension recycling not allowed for DC pensions but ok for DB pensions which are these days only offered to upper level staff.

Paul_Herring

merlin321 wrote: »

Many thanks for reply, It does seem that the pension system ([net-pay]) favours higher earners. Particularly higher tax payers.

No - it simply disadvantages non-taxpayers, who would - in other ways of paying into a pension - be able to 'reclaim' tax that hasn't actually been taken off.

Tax-payers (of either stripe) are 'advantaged' equally, in that they all get to defer tax that would normally be due.

(As opposed to salary sacrifice, where - arguably - 20% tax-payers are advantaged over 40% tax-payers due to savings in NI.)

OldBeanz

Get the AVC cut back online immediately and open a PP or a SIPP for the remaining money.

hyubh

merlin321 wrote: »

For instance pension recycling not allowed for DC pensions but ok for DB pensions which are these days only offered to upper level staff.

Erm, you've posted this on a thread, started by yourself, about a low-paid DB scheme member