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

Tiggy777

Silvertabby wrote: »

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 !

Hi everyone

Still thinking about the best way to take this so as always was would apprecaite any views.

Would people recommend I take the maximun lump sum and the pension of £19k or a smaller lump sum and buy an annuity with any balance.

I would like to think I would be active until 85 but after that would be happy to sit in a chair and watch the world go by.

I struggle with the concept of : taking a smaller lump sum and then buying an annuity and drawing down on it as I would be paying tax on it . Rather than.................taking the max lump sum, having it in my back account and drawing down on it as required.

Hope this all makes sense and would really apprecaite any views.

Many thanks for your help and time

Regards

Tiggy

Linton

Tiggy777 wrote: »

Hi everyone

Still thinking about the best way to take this so as always was would apprecaite any views.

Would people recommend I take the maximun lump sum and the pension of £19k or a smaller lump sum and buy an annuity with any balance.

I would say only take the lump sum if you need the cash, eg to pay off expensive debts. From the figures in your original posting the higher lump sum of £16815 extra would cost you £1444/year in pension. £17K spent on an inflation linked annuity would provide about £500/year. The LGPS lump sum is very poor value (or the pension is extremely generous).

..........

I struggle with the concept of : taking a smaller lump sum and then buying an annuity and drawing down on it as I would be paying tax on it . Rather than.................taking the max lump sum, having it in my back account and drawing down on it as required.

Normally one buys an annuity with pre-tax money from a pension pot. Therefore all the annuity is taxed. If you buy an annuity with your own money that has been taxed or is received tax free most of the income will not be taxed as it is simply you getting your own money back. Only the investment profit part is subject to tax. This latter form of annuity is known as a "Purchased Life Annuity" and is relatively unusual.

Tiggy777

Linton wrote: »

I would say only take the lump sum if you need the cash, eg to pay off expensive debts. From the figures in your original posting the higher lump sum of £16815 extra would cost you £1444/year in pension. £17K spent on an inflation linked annuity would provide about £500/year. The LGPS lump sum is very poor value (or the pension is extremely generous).



Normally one buys an annuity with pre-tax money from a pension pot. Therefore all the annuity is taxed. If you buy an annuity with your own money that has been taxed or is received tax free most of the income will not be taxed as it is simply you getting your own money back. Only the investment profit part is subject to tax. This latter form of annuity is known as a "Purchased Life Annuity" and is relatively unusual.

Many thanks for your reply.

Just for info I pay into my AVC with prudentail (linked to LGPS) via my monthly salary so it's deducted before I pay tax. So I haven't paid any tax on the AVC pot....as opposed to if it was my own money after tax.

Hope that makes sense

Tiggy

Linton

Tiggy777 wrote: »

Many thanks for your reply.

Just for info I pay into my AVC with prudentail (linked to LGPS) via my monthly salary so it's deducted before I pay tax. So I haven't paid any tax on the AVC pot....as opposed to if it was my own money after tax.

Hope that makes sense

Tiggy

You were talking about spending the tax free Lump Sum on an nnuity. Once the Lump Sum is paid to you it becomes your money. So if you used it to buy an annuity (which is a bad idea as pointed out) you would not pay much tax on it.

Tiggy777

Tiggy777 wrote: »

Many thanks for your reply.

Just for info I pay into my AVC with prudentail (linked to LGPS) via my monthly salary so it's deducted before I pay tax. So I haven't paid any tax on the AVC pot....as opposed to if it was my own money after tax.

Hope that makes sense

Tiggy

What I was trying to say (but very badly) was if I take the higher annual pension of £19484 pa and the lump sum of £44185. I still have an AVC totally about £120,000. Should I take as much of the AVC as possible up to the 25% of pot = £140,716 as tax free or buy an annuity with my AVC (120,000) and draw now on it 10-20 years. This is the area I am struggling with. Many thanks Tiggy

AlanP_2

Tiggy777 wrote: »

What I was trying to say (but very badly) was if I take the higher annual pension of £19484 pa and the lump sum of £44185. I still have an AVC totally about £120,000. Should I take as much of the AVC as possible up to the 25% of pot = £140,716 as tax free or buy an annuity with my AVC (120,000) and draw now on it 10-20 years. This is the area I am struggling with. Many thanks Tiggy

What level of income do you need / want in retirement?

If you are happy with indexed £19484 plus indexed SP (from 66'ish) plus rental income why would you buy an annuity?

If you needed monthly income then using the AVC to purchase additional LGPS service / pension may be a better option than an annuity.

My wife and I are in LGPS and contribute to AVCs, the intention is to take them as the TFLS as our monthly income will be sufficient. They are the cherry, on the icing on the cake.