Lgps avc

cherry76

Got letter of confirmation I have now been enrolled into the lgps paying 6.5%. Am looking to contribute a further 8.5%. Looking into Prudential website I am confused I have got no idea about the funds would rather the funds are chosen by prudential for me. Is it possible to get a lot less than your contributions if the funds are doing poorly? Thanks

MallyGirl

all investing carries the risk of capital loss.
I have no idea how the lgps works - is it not defined benefit/final salary any more?

SonOf

Is it possible to get a lot less than your contributions if the funds are doing poorly?

Theoretically, yes. By poorly, I assume you mean negative periods. That doesn't actually mean they are doing poorly as you will always have negative years. And indeed, negative years are good news when you paying in monthly. So, nothing poor about them.

atush

Presumably you have decades to go until you retire?

If so, dont worry too much about markets dropping. If they do, you just buy more units for the same money. In years to come the price will recover and you'll be quids in.

The only downside is if you are investing with months or just a few years to go. Then a major correction could hurt you. but given TR you get on top of your money, markets would have to drop more than 25% for you to be in negative territory.

Gin_and_Milk

I've just got my lgps avc with the Pru sorted, and I went with one of their Life Styling options. They choose the investments depending on your risk appetite, and as you approach retirement age move the money into less risky funds. Your money isn't guaranteed and you could end up with less, but breaking even is still better than nothing at all. I set mine up at £100 per month, but it's £68 which comes out of my wage as the rest is pre deductions.

hyubh

cherry76 wrote: »

Am looking to contribute a further 8.5%. Looking into Prudential website I am confused I have got no idea about the funds would rather the funds are chosen by prudential for me.

Particularly if you're not keen on investing, another option, beyond an AVC, is an APC. This buys you additional DB pension instead, i.e. where you get a fixed amount of additional indexed-linked scheme pension for your additional contributions:

https://www.lgpsmember.org/more/apc/index.php

The pension bought with an APC doesn't have survivor benefits attached however. Also, if you took out an AVC, then at the end you would have the option of buying an APC with the proceeds (and an APC bought from the proceeds of an AVC does include survivor benefits).

Silvertabby

hyubh wrote: »

Particularly if you're not keen on investing, another option, beyond an AVC, is an APC. This buys you additional DB pension instead, i.e. where you get a fixed amount of additional indexed-linked scheme pension for your additional contributions:

https://www.lgpsmember.org/more/apc/index.php

The pension bought with an APC doesn't have survivor benefits attached however. Also, if you took out an AVC, then at the end you would have the option of buying an APC with the proceeds (and an APC bought from the proceeds of an AVC does include survivor benefits).

APC is a good deal for anyone who intends to take their benefits from NRA (same as State pension age) not so good for those who want to retire/take their benefits from, say, 55 due to the early retirement reductions.

One size certainly doesn't fit all, but a very rough rule of thumb could be AVCs for the early retirees and APCs for those who intend to go the whole hog.

cherry76

I am still undecided which fund to choose should I choose the default investment option or lifestyle Prudential dynamic growth 1V. Which of these two are lower risk? Advice will be much appreciated. Clueless and a late starter. Thanks

Apodemus

Silvertabby wrote: »

APC is a good deal for anyone who intends to take their benefits from NRA (same as State pension age) not so good for those who want to retire/take their benefits from, say, 55 due to the early retirement reductions.

One size certainly doesn't fit all, but a very rough rule of thumb could be AVCs for the early retirees and APCs for those who intend to go the whole hog.

Happy to be corrected, but as far as I can make out, APCs don’t follow the “rule of 85”, so the actuarial reduction for taking it early can be greater than that for the rest of the pension.

Although this will not be a concern for the OP as they will have no “rule of 85” element.

hyubh

Apodemus wrote: »

Happy to be corrected, but as far as I can make out, APCs don’t follow the “rule of 85”, so the actuarial reduction for taking it early can be greater than that for the rest of the pension.

Although this will not be a concern for the OP as they will have no “rule of 85” element.

Indeed, the 85 year rule hasn't been a thing for new joiners for over 13 years. Even a current member has to be around 60 to have just tapered protection for any benefits earned since March 2008.

Rich2808

hyubh wrote: »

Indeed, the 85 year rule hasn't been a thing for new joiners for over 13 years. Even a current member has to be around 60 to have just tapered protection for any benefits earned since March 2008.

Agreed but anyone with pre April 2008 service doesn't suffer an acturial reduction on that element of their pension once they meet the 85 year rule. A lot of people take flexible retirement to take advantage of it subject to their employers agreeing - work 3 days a week and then claim the pension for the pre 2008 service for the other two. But its sadly its not possible to simply claim your pre 2008 pension element and defer your post 2008 pension until your state retirement age to avoid the actuarial reduction.

So its less flexible if you are still an LGPS member.