Shared cost AVC's.

Energize

So I am currently enrolled into the LGPS scheme and pay the full amount, now my understanding as per the recent intranet announcement is that I can top this up with a shared cost AVC where I sacrifice salary and therefore pay less NI and student loan contributions in addition to the normal tax savings. I believe I can even do this in the 50/50 scheme. Not having a family I do not in the least bit care about death benefit.

So what are the potential advantages and disadvantages of this scheme? There doesn't seem to be as much information online as I had expected.

AlanP_2

That doesn't sound like a Shared Cost AVC to me i.e one where the employer makes a contribution over and above what the employee puts in.

It sounds like a Standard AVC via Salary Sacrifice.

Have you read this https://www.lgpsmember.org/arm/already-member-extra.php?

The main advantage is that you can take the AVC pot as your Tax Free Lump Sum (TFLS) up to the level of 25% if the overall pension pot - (20 * Annual Pension) plus AVC Pot = £x, and you can take 25% of x tax free.

Main disadvantage is that you can only do that at the point of taking the whole LGPS pension, you lose the TFLS option if you split them.

No idea whether the 50/50 scheme affects this or not.

hyubh

AlanP wrote: »

That doesn't sound like a Shared Cost AVC to me i.e one where the employer makes a contribution over and above what the employee puts in.

It sounds like a Standard AVC via Salary Sacrifice.

No, it's a shared cost AVC since salary sacrifice in this context means, pension contributions are all employer contributions for tax purposes.

Basically a particular third party put two and two together and have been selling this solution to employers and members. The scheme regs themselves don't have the concept of a salary sacrifice AVC, but don't need to.

saucer

hyubh said:

Alanp wrote: »

That doesn't sound like a Shared Cost AVC to me i.e one where the employer makes a contribution over and above what the employee puts in.

It sounds like a Standard AVC via Salary Sacrifice.

No, it's a shared cost AVC since salary sacrifice in this context means, pension contributions are all employer contributions for tax purposes.

Basically a particular third party put two and two together and have been selling this solution to employers and members. The scheme regs themselves don't have the concept of a salary sacrifice AVC, but don't need to.

Rather than start a new thread I thought I would continue this one, but have an additional question.

Mrs Saucer is in a LGPS scheme where she is being offered to transfer her current AVC arrangements to a shared cost AVC. It will remain under the Pru.  My understanding is that the main advantage to her is that she will save on National Insurance. 

Does anyone know whether there are any disadvantages e.g. would it make her final salary lower when it comes to determining her pension (on which a lot of her pension will be based)? Many thanks 😊 

OldBeanz

saucer said:

hyubh said:

Alanp wrote: »

That doesn't sound like a Shared Cost AVC to me i.e one where the employer makes a contribution over and above what the employee puts in.

It sounds like a Standard AVC via Salary Sacrifice.

No, it's a shared cost AVC since salary sacrifice in this context means, pension contributions are all employer contributions for tax purposes.

Basically a particular third party put two and two together and have been selling this solution to employers and members. The scheme regs themselves don't have the concept of a salary sacrifice AVC, but don't need to.

Rather than start a new thread I thought I would continue this one, but have an additional question.

Mrs Saucer is in a LGPS scheme where she is being offered to transfer her current AVC arrangements to a shared cost AVC. It will remain under the Pru.  My understanding is that the main advantage to her is that she will save on National Insurance. 

Does anyone know whether there are any disadvantages e.g. would it make her final salary lower when it comes to determining her pension (on which a lot of her pension will be based)? Many thanks 😊 

There is no way that an SS AVC would even be contemplated in the LGPS if it degraded the DB. The only downside is that you can only SS down to Min Salary (somewhere around £16k depending on hours) and you may want to contribute all her taxable salary (I would assume the normal contributions would be available as well).

saucer

OldBeanz said:

saucer said:

hyubh said:

Alanp wrote: »

That doesn't sound like a Shared Cost AVC to me i.e one where the employer makes a contribution over and above what the employee puts in.

It sounds like a Standard AVC via Salary Sacrifice.

No, it's a shared cost AVC since salary sacrifice in this context means, pension contributions are all employer contributions for tax purposes.

Basically a particular third party put two and two together and have been selling this solution to employers and members. The scheme regs themselves don't have the concept of a salary sacrifice AVC, but don't need to.

Rather than start a new thread I thought I would continue this one, but have an additional question.

Mrs Saucer is in a LGPS scheme where she is being offered to transfer her current AVC arrangements to a shared cost AVC. It will remain under the Pru.  My understanding is that the main advantage to her is that she will save on National Insurance. 

Does anyone know whether there are any disadvantages e.g. would it make her final salary lower when it comes to determining her pension (on which a lot of her pension will be based)? Many thanks 😊 

There is no way that an SS AVC would even be contemplated in the LGPS if it degraded the DB. The only downside is that you can only SS down to Min Salary (somewhere around £16k depending on hours) and you may want to contribute all her taxable salary (I would assume the normal contributions would be available as well).

Many thank OldBeanz. That is good to know. All steam ahead with the new ss avc then