Pru AVC TFLS or increase LGPS pension?

Roman_Holiday

Hi,
This may be a daft question, but is it worthwhile exchanging an AVC tax free lump sum of £60k for a pre tax annual LGPS increase of £2.7k?
I'm a basic rate tax payer.
I'm struggling with the trade off between the tax free element and the index linked pension uplift and their relative values.
My instinct is that surrendering the tax free benefit of the lump sump would take many years of cpi linked pension payments to break even...

JoeCrystal

It is not a daft question!

You are correct that it would take many years to break even. Assuming 2% CPI inflation, it would take 23 years in pure cash term to get more via after-tax pension (understanding the tax laws have not changed). As for the worthwhileness of choice, it depends on many factors.