Top up LGPS/ AVC's

Didsy

Hello folks

I deferred my LGPS appx 3/4 years ago due to some financial issues. Those are sorted now & I have restarted it

I can afford to spare about £50 each month & I would like to try & "top up" for the lost years.

My LGPS provider suggested an AVC but I was wondering if there were any other options or suggestions. I basically have zero knowledge on this sort of thing & would appreciate any advice from you lovely folks. :T

Spreadsheet_Addict

My LGPS provider suggested an AVC but I was wondering if there were any other options or suggestions.

You can invest in AVC (basically it builds up a lump sum and you pay it before tax, so if you are a basic rate taxpayer, you pay in £8 and the taxman pays £2, You take it at the same time as your pension and it's tax free as long as it's not more than 25% of the total value of your annual pension x 20 + the total AVC (so if your pension was £10k a year and the AVC pot was £50k, 20 x £10k = £200k + 50K = £250k = £62.5k so you would get it tax free.)

Alternatively you can buy additional pension, which works like your existing pension and is drawable at the same time. You buy it in chunks of £250 per year. It costs roughly 10X what you're buying from your salary - so to get £250 a year for life, you pay £2500. You can buy roughly £6500 this way. It is reduced for early payment though, like your main pension even if you get made redundant after 55, so worth bearing in mind. These contributions are also before tax, so the taxpayer pays his share of the £2500.

The national LGPS website has information about this. https://www.lgpsmember.org/more/apc/index.php

Apodemus

Spreadsheet_Addict wrote: »

It is reduced for early payment though, like your main pension even if you get made redundant after 55, so worth bearing in mind. These contributions are also before tax, so the taxpayer pays his share of the £2500.

Just to clarify, if you are made redundant after age 55 (and you have been in the scheme for 2years) your normal pension payments are not reduced, but your Additional contributions are.

If you make lump-sum additional payments, you pay the full sum and claim back the tax element from HMRC.

Spreadsheet_Addict

Yes that's right. Thanks for the clarification - I didn't phrase that very clearly.