Transferring (LGPS) AVCs to new provider

Fairzo

Dear all, a basic question on AVC transfer but first a bit of background.

I'm 62 and have an LGPS pension in payment from a previous LA employer (taken at age 60). When I joined another LA employer 4 years ago I did not combine or transfer the previous pension (obviously) but started paying AVCs through salary sacrifice, to both build a lump sum and minimise tax / NI.

I have now ceased the AVC contributions and want to transfer to another provider for drawdown over the next few years (again to minimise the tax take). I don't need to think about annuity.

The request to transfer the AVC pot seems to have confused the current employer. Two pieces of correspondence give the impression that they think I'm asking for a Cash Equivalent Transfer Value of the LGPS pension (not just the AVCs).

I've stressed both over the phone and in writing that it is only the AVC pot that I want to transfer. Hopefully this will just sort itself out relatively quickly but from the above there should be no issue with simply transferring the AVCs as a completely separate entity to the LGPS DB pension, should there?

Apologies for the long-winded means of getting to the question but any thoughts welcomed. Thanks

Silvertabby

This is an in-house AVC scheme so, depending on current regs (I've been retired for a bit) you probably can't do anything with your AVCs until you take your main scheme LGPS benefits.

At that point, transferring to another provider (used to be called the open market option) would be possible - but are you missing a trick here? The most popular reason for taking in-house AVCs is the tax free option. Unless you have been really stuffing your AVC contributions, you may be able to take all of your AVCs as tax free cash when you retire.

You won't have any automatic lump sum with your current LGPS pension so, the formula is:

20 x actual LGPS pension plus 1 x AVC fund / 25% = maximum tax free cash.

Note that if your AVC fund is less than the 25% figure, then you would only be able to realise that by commuting some of your LGPS pension. If you don't want to do that, then you would be able to take just the AVC as tax free cash.

On the other hand, if your AVC alone is more than 25% then you can either use the surplus to buy additional benefits in the LGPS (at a much better rate than a normal annuity) or transfer it out to another scheme.

ADD.

Looks like you can, unless you had AVCs with your previous (in payment) LGPS pension. However, being able to do something is not necessarily the same as you should do something. If your priority is reducing your tax bill, then taking the maximum as tax free cash with your current LGPS benefits may be the way to go?

Transfer your AVC plan You have the right to transfer your AVC plan independently of your main scheme benefits even if you are still paying into the main LGPS scheme. However, there are certain conditions that must be met:

• you must have stopped paying AVCs in any LGPS employment you hold
• you must not be in receipt of regular income either from an annuity or a top-up pension in the LGPS in respect of a LGPS AVC plan that you paid into and took payment of previously
• if you hold more than one LGPS AVC plan you must transfer out all of your plans even if the plans are held with different LGPS funds (other than an AVC plan awarded to you as part of a divorce settlement)

If you transfer your AVC plan to one or more different pension arrangements you may be able to access options that are not available under the LGPS rules.

Fairzo

Thanks for reply, appreciate what you're saying. I did really stuff the AVC contributions, around 75% of salary, so the 25% tax free of LGPS + AVC would be significantly less than the current AVC pot. I'm keen on accessing the AVC / drawdown tax free in this financial year if I can but retirement won't be until probably 2021.

The LGPS advice seems to be that the AVCs can be transferred out independently, despite the apparent best efforts of the employer pension staff to delay it.

Thanks again.

Silvertabby

Your LGPS won't be deliberately delaying your request - more likely that they've never been asked to do this before.

The full link is:

https://www.lgpsmember.org/more/AVCoptions.php

Lummoxley

In my scheme you can move the AVC but if you separate it from your main LGPS you lose the tax advantage of the AVC counting as part of your LGPS lump sum calculation.

My advice would be to check your scheme rules and if anything doesn't seem right post it back here for advice if your scheme administrator's can't help.