Best way to take funds LGPS/AVCs/Rental income ?

Tiggy777

Hi all

Would really appreciate any advice on this please.

My position is I have been contributing in the LGPS since 1980 and in the last few years I have been putting all my salary into AVCs with prudential through my employer.

If I go in May 2019 my reduced pension will be £19484pa with a lump sum payment of £44,185, my AVC will be approx. £120,000 and I also get approx. £17,000pa in rental income. This rental income will last for a further 7 years after that it will drop to about £8,000pa.

I have a further option of maximising my LGPS lump sum to £61,000 and then taking a reduced pension of £18,040pa.

I am trying to work out the 'best way' to take these funds and even considering leaving at 57 and then drawing an unreduced pension at 60 (this will add a further £3,000pa to my pension) but acknowledge I would be 3 years in at £18,040pa)

My head keep going around and around on this so would really welcome a second option on the various options.

Many thanks for any advice and thank you for your time

Regards

Tiggy

Linton

Have you looked at taking the DB lump sum from the AVC and so maximising your DB income?


PS and your TFLS

Silvertabby

With your length of service, you will have full R85 protections in respect of your pre 2008 service - but only if you take your benefits from age 60.

Yes, taking reduced benefits from 57 will give you an extra 3 years of pension - but at what cost? Assuming you are in good health, £3K a year reduction over - easily - 30 years = £90K PLUS cost of living increases over that time.

Also,why are you looking at commuting (giving up part of your pension for a bigger tax free lump lump - at the very unfavourable rate of 1:12) when you have an in-house AVC fund ? The main attraction of paying into an AVC is the way all or most of it can be taken as tax free cash, thus leaving the main scheme pension unreduced.

Using your age 57 figures of:

Pension = £19,484.00
Lump Sum = £44,185.00
AVC = £120,000.00

20 x £19,484.00 = £398,680.00 plus

1 x £44,185.00 plus

1 x £120,000.00 =

£562,865.00 x 25% = £140,716.25

New figures:

Annual pension = £19,484.00
Tax free Lump Sum = £140,716.25

Plus residual AVC fund of £23,468.75 - which may either be used to purchase additional index linked pension in the LGPS, or as offered by the Pru.

NOTE: If you do decide to defer payment until 60, then you won't be able to use your residual (spare) AVC money to buy extra LGPS benefits - that option only applies to those who retire direct from working.

kidmugsy

Silvertabby wrote: »

Plus residual AVC fund of ... which may either be used to purchase additional index linked pension in the LGPS, or as offered by the Pru.

I had some unused AVC with the Pru (though not associated with LGPS). I eventually moved it to a SIPP. Is that ever an option with LGPS/Pru?

Aiki

I interested in the comment around the missed income in taking a DB pension early. In this example there was the potential of £3K over 30 years plus pension increases for the benefit of 3 years of pension at £18Kpa. In (very) simplistic terms, break even is 18 years, so mid 70's.

In my case I am looking at taking my DB even earlier. One of the reasons why I am considering this is that although I expect to live for another 30 years, how much money will I need in the final years so would I really miss the £3K for those last years?
I am still pondering this question/equation while I wait for my provider to give me the details.

Silvertabby

kidmugsy wrote: »

I had some unused AVC with the Pru (though not associated with LGPS). I eventually moved it to a SIPP. Is that ever an option with LGPS/Pru?

Yes, what used to be called 'the open market option'. May need financial advice though - especially if retiring from live status and therefore forgoing the option of buying extra LGPS pension.

I used to see the Pru annuity quotes for surplus AVC funds - and they were considerably less than the extra pension offered by the LGPS.

Useful/only option if you wanted to drawdown, though.

Crabby

Is this the best plan of action for my wife? She wants to retire this year at 58, she has 35years service worth of LGPS. Her salary is just above the tax threshold as she's worked mostly part time. She has an AVC that is roughly equal to her last pension statement lump sum, and a SIPP worth 2 years salary.
The plan is to top up the SIPP to the maximum amount when she retires at the end of the year, and withdraw the maximum tax free amounts over the next 2 years to live on. Then she'll take her pension at 60 using the AVC as the lump sum to maximise pension income.
After she retires put £2880 a year into a SIPP until she gets her State pension when she becomes a tax payer again.

AnotherJoe

Crabby wrote: »

Is this the best plan of action for my wife? She wants to retire this year at 58, she has 35years service worth of LGPS. Her salary is just above the tax threshold as she's worked mostly part time. She has an AVC that is roughly equal to her last pension statement lump sum, and a SIPP worth 2 years salary.
The plan is to top up the SIPP to the maximum amount when she retires at the end of the year, and withdraw the maximum tax free amounts over the next 2 years to live on. Then she'll take her pension at 60 using the AVC as the lump sum to maximise pension income.
After she retires put £2880 a year into a SIPP until she gets her State pension when she becomes a tax payer again.

Still worthwhile doing after SP.

AlanP_2

Silvertabby wrote: »

Using your age 57 figures of:

Pension = £19,484.00
Lump Sum = £44,185.00
AVC = £120,000.00

20 x £19,484.00 = £398,680.00 plus

1 x £44,185.00 plus

1 x £120,000.00 =

£562,865.00 x 25% = £140,716.25

New figures:

Annual pension = £19,484.00
Tax free Lump Sum = £140,716.25

Plus residual AVC fund of £75,815.00 (ie, £140,000.00 - £44,185.00) - which may either be used to purchase additional index linked pension in the LGPS, or as offered by the Pru.

Is it not a residual AVC of around 24k based on 120+44-140k or have I missed something?

Silvertabby

AlanP wrote: »

Is it not a residual AVC of around 24k based on 120+44-140k or have I missed something?

Doh - good spot of my senior moment (we all have 'em!)

£120,000 AVC fund

£140,716.25 total tax free cash minus £44,185.00 standard lump sum = £96,531.25

£120,000.00 minus £96,531.25 = £23,468.75 residual.

Have amended my post - thanks !

Tiggy777

Hi all


Many thanks for all the very informative replies.


Thank you for your time


Regards


Tiggy