Moving from private pension to LGPS

Aylesbury_Duck

I currently work for a private company and have an associated pension scheme into which my employer pays 5% of my salary and I pay 40% via salary sacrifice (to bring me down to standard rate tax). I may be moving to work for the local authority later this year and therefore onto the LGPS, on a similar salary. I can add contributions to an AVC Prudential scheme run alongside my local authority via salary sacrifice, but I'm aware that if I continue to add at the rate I do currently (40% of salary) then the pot will be way over the 25% of the total LGPS benefit when I reach 67. Would it be sensible to limit my AVCs to an amount that brings me close to the 25% so that I can take all of it tax-free at 67, and pay separately (post-tax) into another private scheme that gives me more flexibility on what I can draw from 55? If I do that, presumably I claim the extra tax relief through noting my private contributions on my tax return.

Or is it not worth worrying about and just put the 40% straight into the AVC knowing that I can only take 25% tax free and use the rest to buy more LGPS pension?

FatherAbraham

Aylesbury_Duck wrote: »

I currently work for a private company and have an associated pension scheme into which my employer pays 5% of my salary and I pay 40% via salary sacrifice (to bring me down to standard rate tax). I may be moving to work for the local authority later this year and therefore onto the LGPS, on a similar salary. I can add contributions to an AVC Prudential scheme run alongside my local authority via salary sacrifice, but I'm aware that if I continue to add at the rate I do currently (40% of salary) then the pot will be way over the 25% of the total LGPS benefit when I reach 67. Would it be sensible to limit my AVCs to an amount that brings me close to the 25% so that I can take all of it tax-free at 67, and pay separately (post-tax) into another private scheme that gives me more flexibility on what I can draw from 55? If I do that, presumably I claim the extra tax relief through noting my private contributions on my tax return.

Or is it not worth worrying about and just put the 40% straight into the AVC knowing that I can only take 25% tax free and use the rest to buy more LGPS pension?

You need to consider the National-Insurance implications of paying into a private pension from net pay (i.e. it will cost you more than paying into AVC by salary deduction).

It's interesting that you say that you're pension-contributing 40% of your salary now, in order to avoid paying 40% tax, rather than saying that you're doing so to provide for your retirement.

Finally, I don't think that AVC funds can be used to buy more LGPS defined benefits - they can be used to provide income like a defined-contribution fund.

girllikeme1

Also within 12 months of joining the LGPS you can also transfer in previous pensions. I would suggest you discuss with a Financial Advisor before doing anything like that but be aware of the 12 month window for transferring in as afterwards you won't have that option.

I am in the LGPS myself and kind of wish I had realised this when I joined!

Pension_Geek

Is this an option?

https://www.lgpsmember.org/arm/already-member-extra.php

Aylesbury_Duck

FatherAbraham wrote: »

You need to consider the National-Insurance implications of paying into a private pension from net pay (i.e. it will cost you more than paying into AVC by salary deduction). Good point, thank you.

It's interesting that you say that you're pension-contributing 40% of your salary now, in order to avoid paying 40% tax, rather than saying that you're doing so to provide for your retirement. Yes, it's primarily to provide for retirement but it seems sensible to do what I'm doing as I'm in the fortunate position of being able to afford the net pay reduction and save in cash and S&S ISAs for the medium term (I'm 46)

Finally, I don't think that AVC funds can be used to buy more LGPS defined benefits - they can be used to provide income like a defined-contribution fund.

girllikeme1 wrote: »

Also within 12 months of joining the LGPS you can also transfer in previous pensions. I would suggest you discuss with a Financial Advisor before doing anything like that but be aware of the 12 month window for transferring in as afterwards you won't have that option.

I am in the LGPS myself and kind of wish I had realised this when I joined!

Thank you, I had not appreciated that.

Pension_Geek wrote: »

Is this an option?

https://www.lgpsmember.org/arm/already-member-extra.php

Thank you, I'll explore that.