Savings or LGPS AVC

marycanary

Hello,
I hope to obtain the views of knowledgeable people on this board.
My circumstances are,

• 57 years old
• Divorced 
• No mortgage or other debts
• Have an emergency fund in place of one year's spending in  Marcus & TSB Accounts
•  Work in local government
• Earn £62000 per year
• Currently putting £850 into AVC with the Prudential in addition to contributions into the LGPS. 
•  Save £1000 per month in a combination of an FD Regular Saver and Marcus. 
• Want to retire in 12 months.

 My question is, should I stop funding the Marcus Account and the FD Regular Saver when it finishes and instead make additional AVC payments for 12 months to obtain the tax relief? The Pru has a cash account paying 0.6% as part of their AVC offer but the interest is not the issue.
Thank you
Mary

Silvertabby

When did you join the LGPS?  If it was before 1998 then you would have full Rule of 85 protections in respect of your pre 2008 service if you defer retirement until age 60.

camelopardis

Are you able to contribute to AVCs via sal sac? If you can afford to save 1000 a month, and you are retiring in 12 months, your best bet would be to pay all that into AVCs via sal sac making a huge saving on tax and NI.

marycanary

Thank you for replying
Slivertabby - I understand the implications of going before 60 but I am sick of being responsible for making cuts in services for very vulnerable people. Plus, three people I know, a close friend, a colleague and an acquaintance have died recently in their 50s, two suddenly and without warning.  I can afford to live comfortably on a reduced pension and savings until SPA
cameopardis - my employer does not offer sal sac for pensions, only child care costs. 
Mary

OldBeanz

Your LGPS Pru AVC is the cherry on top of the gold pension. You should consider how to work out the max you can take out in cash from theAVC and devise a plan to maximise your contributions.

marycanary

Thank you for your thoughts. I think I will go with the option of adding savings via AVC. However, I cannot work our the implications of the Annual Allowance when split between two DB pensions, one deferred and one active and AVC. Does anyone know how to work this out and even whether I need to worry about it at all?
Mary

Silvertabby

marycanary said:

Thank you for your thoughts. I think I will go with the option of adding savings via AVC. However, I cannot work our the implications of the Annual Allowance when split between two DB pensions, one deferred and one active and AVC. Does anyone know how to work this out and even whether I need to worry about it at all?
Mary

Your LGPS should have a team of people keeping an eye on this, and would/should warn you if you are likely to bust the AA.  It really depends on how much you intend to put into your AVC. 

In the meantime, your AA is shown on your annual benefit statements.

AlanP_2

marycanary said:

Thank you for your thoughts. I think I will go with the option of adding savings via AVC. However, I cannot work our the implications of the Annual Allowance when split between two DB pensions, one deferred and one active and AVC. Does anyone know how to work this out and even whether I need to worry about it at all?
Mary

The deferred DB shouldn't matter as regards AA assuming the value of the benefit goes up by CPI each year as the calculation is (16 * Last Years + CPI) compared to 16 * this years (which will have increased by CPI).

The active DB will matter, so you need to have a good feel for the AA value that creates each year. Unless you get a large payrise the figure will broadly be in line with previous year so can be seen on, or calculated from,  your LGPS Statement.

The CARE value for this year on a £62k salary will be calculated as (16 * (62000/49)) = £20,245.

If the £62k represents a payrise then your pre-2014 and pre-2008 Final Salary elements will also increase as will your pre-2008 automatic lump sum value.

The amount paid into your AVC is just that a £amount, so adding it to your typical DB AA element should give you a pretty accurate annual figure.

If >£40k then you would need Carry Forward allowancd from the previous 3 years to support that level of contribution.