GAD factor applied to AVC to buy extra LGPS pension

Moby

I'm trying to work out if its better to take my LGPS AVC as a cash free lump sum or use it to buy a scheme annuity. I've been told that from the age of 60 and 0 months to 60 and 5 months the GAD factor is 5.10% - so an AVC fund of say 35K would buy £1785 extra annual pension - £35 000 x 5.10% = 178500.

I'm just checking that following the above example if I retired say aged 58 the GAD factor applied would be 4.90%. So a £35 000 fund would buy £1715 annual pension?

MK62

That's the way it normally works.....

It's a tough call........that 4.9% additional pension does come with increases (in line with the main scheme I believe) and it does have some death benefits.

On the face of it, you might struggle to match that by taking it as a tax free lump sum and going to the open market......presumably investing it in a S&S ISA over a couple of years (or ISAs if married) and using drawdown...

Bear in mind though that you'll pay income tax on the additional pension if it's over your personal allowance.......obviously you wouldn't for ISA income.

If it was me, despite the possible income tax, I think that as the additional pension is risk free and at a decent level, it would make it hard to resist tbh......but that's just me.