In house AVC

cherry76

Just started new job with Greater London Authority. Have not received any welcoming letter from the pensions office yet. I am interested to contribute up to 15% of my salary buying avc. Is this something I need to set up myself by contacting Prudential? I will opt for the default fund! Thanks

Silvertabby

cherry76 wrote: »

Just started new job with Greater London Authority. Have not received any welcoming letter from the pensions office yet. I am interested to contribute up to 15% of my salary buying avc. Is this something I need to set up myself by contacting Prudential? I will opt for the default fund! Thanks

Yes - but when you do you will need to make it quite clear to the Pru that this is an in-house AVC plan and that you are a contributing member of the GLA/LGPS. Payments will then be taken direct from your salary.

AlanP_2

Whilst acknowledging that Silvertabby is the LGPS guru on here I would just say that with my LA the liaison with the AVC provider is via the LGPS Admin team. They give us the relevant forms when asked for and then process them trough payroll and the provider.

xylophone

Have you seen

https://www.pru.co.uk/rz/localgov/avcs/

daveyjp

Also check if they offer the option of the AVCWise salary sacrifice scheme.

Silvertabby

AlanP wrote: »

Whilst acknowledging that Silvertabby is the LGPS guru on here I would just say that with my LA the liaison with the AVC provider is via the LGPS Admin team. They give us the relevant forms when asked for and then process them trough payroll and the provider.

Could be - different LGPS, different ways.

cherry76

Thanks. I want to contribute 15% of my salary. As I will be paying 6.5% monthly deducted from salary. Am I right to think that when filling avc form I need to put I want to contribute 8.5%. Being a newbie I thought work will set it up for me.

Silvertabby

cherry76 wrote: »

Thanks. I want to contribute 15% of my salary. As I will be paying 6.5% monthly deducted from salary. Am I right to think that when filling avc form I need to put I want to contribute 8.5%. Being a newbie I thought work will set it up for me.

Again, different schemes, different ways of doing things - but in the case of the LGPS I worked for you would have to specify an actual amount rather than a %age. You could, of course, increase this amount each year in line with your pay inceases.

AlanP_2

With mine you can specify %'age or £amount and change between the two. I think your best option is to thoroughly search your intranet and the authorities LGPS website if they have one and to contact Pensions Admin and ask for booklets / forms as they all have slightly different ways of doing things.

In your first post you indicated 15% in to AVC and then indicated that the 15% would be split across standard 6.5% LGPS deduction with the 8.5% balance in to the AVC.

Not sure how familiar you are with LGPS and terminology but the main LGPS is a different beast to the AVC scheme with different benefits at retirement.

cherry76

Not very familiar with LGPS. Only got 2 yrs deferred pension from previous LGPS and a small pot in nest. Late starter at 40 yrs. The max I am allowed to contribute is 6.5% and I thought 8.5% into an inhouse avc. Does this make sense? Cannot afford to contribute more. Will do more research once I get all info and booklets. Thanks

AlanP_2

cherry76 wrote: »

Not very familiar with LGPS. Only got 2 yrs deferred pension from previous LGPS and a small pot in nest. Late starter at 40 yrs. The max I am allowed to contribute is 6.5% and I thought 8.5% into an inhouse avc. Does this make sense? Cannot afford to contribute more. Will do more research once I get all info and booklets. Thanks

Makes sense but I would suggest you "forget" that the main LGPS scheme costs you 6.5% contribution as you would get exactly the same benefits whether it was 2.5% or 12.5%. You are getting a DEFINED BENEFIT (1/49th CARE accrual rate) and the current scheme rules say that an employee on your salary contributes 6.5%.

What you then need to look at is how much you can pay afford to pay in to the AVC option, or the APC option if that is more suitable for your needs, out of your take home pay and multiply it by 1.25 (for a Basic Rate taxpayer) to arrive at the amount you ask them to deduct for AVCs each month.

£80 take home = £100 into AVC and so on as there is tax relief to allow for.

With the AVC option you are building an invested pot in the same way as a DEFINED CONTRIBUTION scheme works. What it will worth in n years time is down to how well your chosen investments
perform.

In practice given that you get tax relief on both main LGPS and AVC contributions and you can take your AVC as a tax free lump sum you would have to be really, really unfortunate to lose out.