LGPS Prudential AVC through Wise

Jimbouk

My wife has recently been given the option to purchase AVCs via salary sacrifice via the her LGPS pension scheme and a company called AVC wise and the Prudential

In basic terms if £500 per month is sacrificed from her salary in around £625 will hit the account , so over the three years she has left until she is 55 this could end up as a tidy tax free sum on retirement. We understand the tax free implications against her main pot .

We have been looking in to it a little and to be honest it looks ideal for our short term goals.

The only real are a of concern for us is what fund to choose with the default fund been the Pru with profits fund.
Ideally i think we would go for mid level risk but we are unsure which would be the best fund from those available

Medium Risk

• Aberdeen Life Multi Asset Fund
• Prudential Discretionary Fund
• Prudential Dynamic Growth IV
• Prudential Index-Linked Fund
• Prudential Long Term Bond Fund
• Prudential Long-Term Gilt Passive Fund
• Prudential UK Property Fund

Lower to medium risk

• Prudential All Stocks Corporate Bond Fund
• Prudential Dynamic Growth Il
• Prudential Fixed Interest Fund
• Prudential With-Profits Fund

We would be interested to hear if any of you have experience of this or other similar schemes or the funds
Your advice as always would be greatly received

Thanks in advance

Durban

Have you looked at the reduction in the LGPS pension by going early at 55?

If she does only have 3 years , it's best to have them in the lowest risk possible.

I have AVC's with Prudential but as I am still over 12 years away from retiring , I have them in 3 high risk funds but will lower the risk as I get closer to retirement.

LGPS AVC's are an excellent , tax efficient way to build up a lump sum.
Tax free on the way in and tax free on the way out.

Your wife is even luckier having the salary sacrifice option as my one doesn't.

Jimbouk

Thanks for the reply.

Retirement @ 55 may or may not happen and she is fully aware of the reductions , ideal situation with the way things are at the moment would be VR or redundancy @ 55 but i suppose that is just a pipe dream at the moment.
The Salary sacrifice seems a no brainer and im even thinking about contributing to it myself by giving her the cash each month.

OldBeanz

3 years means lowest risk. Cash would still give you a healthy profit.

cloud_dog

Jimbouk wrote: »

Thanks for the reply.

Retirement @ 55 may or may not happen and she is fully aware of the reductions , ideal situation with the way things are at the moment would be VR or redundancy @ 55 but i suppose that is just a pipe dream at the moment.
The Salary sacrifice seems a no brainer and im even thinking about contributing to it myself by giving her the cash each month.

Based on the numbers you have provided we are not talking about Salary Sacrifice here, merely standard basic rate tax relief on pension contributions.

Jimbouk

It's definitely salary sacrifice, these are purely a guesstimate as to the amount we would have to stipulate to be deducted from the salary.
My wife earns around 32k so is a basic rate taxpayer and she wants to see a £500 per month reduction in her take home pay, possibly rising to £750 if I contribute .
Any advice to more accurate figures would be appreciated.

Jimbouk

As stated I'm my initial post the company running the scheme is avcwise

daveyjp

Avcwise is the salary sacrifice provider for LGPS Prudential AVCs only.

If you are investing in AVCs anyway it really is a no brainer.

The avcwise website has a calculator. On a £32k salary and £750 contribution you would pay £89.88 less a month in NI contributions. You can choose to invest this NI saving into the AVC which increases the contribution to £881 and you then save £105 NI a month.

cloud_dog

Jimbouk wrote: »

It's definitely salary sacrifice, these are purely a guesstimate as to the amount we would have to stipulate to be deducted from the salary.
My wife earns around 32k so is a basic rate taxpayer and she wants to see a £500 per month reduction in her take home pay, possibly rising to £750 if I contribute .
Any advice to more accurate figures would be appreciated.

As a BRT payer your wife will save an additional 12% of NI based on the AVC contribution.

In essence if you calculate 68% (20% TR and 12% NI) of the amount you wish to contribute, that is the reduction in take home pay.

Jimbouk

cloud_dog wrote: »

As a BRT payer your wife will save an additional 12% of NI based on the AVC contribution.

In essence if you calculate 68% (20% TR and 12% NI) of the amount you wish to contribute, that is the reduction in take home pay.

Thanks again
So in basic terms if we stipulate £1320 per month investment it should make a £1000 difference in monthly take home pay

cloud_dog

£1320 contribution will reduce the take home by £897.60.

If you want a reduction of £1000 in take home pay then:

£1000 / 68 - 68 is the reduction based on 20% TR and 12%NI

Multiply result by 100

= £1470.59

Percentages are all about what percentage are ou calculating, i.e. a percentage from 1000 or a percentage of 1320 etc.