LGPS and AVCs

clonkel

Hi,

I am being made redundant an I have a local government pension scheme and have some additional AVCs.

The scheme says: You can take some or all of your AVC plan as a tax ­free lump sum, provided that: ­ when added to any lump sum you take from your main LGPS benefits, the total tax–free lump sum does not exceed 25% of the overall value of your LGPS benefits you are taking at that particular time (this includes the value of your AVC plan).

I have no idea what this means. I am not going to take any tax free allowance from my main LGPS as I am only 56 and I expect to receive the pension for a number of years and the tax free amount is not worth the loss on the annual pension amount i.e. I will lose after only 12 or so years. Given that I am not taking a tax free amount from my LGPS can I take it from my AVC?

I am really not sure what the overall value of the LGPS benefits is.

Thank you very much

Silvertabby

20 x annual pension plus 1 x standard lump (if any) plus 1 x AVC fund x 25% = maximum tax free cash.  If this is more than your AVC fund then you will be able to take all of your AVC as cash.  If less, then you will be able to use the residue (or even all of your AVCs if you wish) to buy extra LGPS benefits.

Note that this is only a notional valuation of your LGPS benefits for the 25% tax free cash calculation.

clonkel

Thank you @Silvertabby So if the annual pension is 10k then that would be 200k + 40k (avc) = 240 x 0.25 = 60k
Can that 60k be used as 40k for the avc then 20 to the main fund if needed/wanted?
I would like to know that I can distribute it to the AVC first?

thank you very much indeed

Silvertabby

clonkel said:

Thank you @Silvertabby So if the annual pension is 10k then that would be 200k + 40k (avc) = 240 x 0.25 = 60k
Can that 60k be used as 40k for the avc then 20 to the main fund if needed/wanted?
I would like to know that I can distribute it to the AVC first?

thank you very much indeed

clonkel said:

Thank you @Silvertabby So if the annual pension is 10k then that would be 200k + 40k (avc) = 240 x 0.25 = 60k
Can that 60k be used as 40k for the avc then 20 to the main fund if needed/wanted?
I would like to know that I can distribute it to the AVC first?

thank you very much indeed

Based on these figures, £60K is the maximum tax free cash you can take iaw HMRC rules.  Because your AVC fund is less than this, you can take all of your AVC as cash leaving your £10K pension untouched.  

clonkel

@Silvertabby thank you very much.
That was the answer I was hoping for. I can allocate the tax-free (whatever it is) to the AVC first. I thought I HAD to allocate to main pension first.

Really great thank you again

clonkel

Reply from pensions

Your AVC forms part of your overall LGPS pension benefits. You can take up to 25% of your LGPS pot as tax-free cash. Pension you accrued before 2008 includes an automatic lump sum which takes up some of the 25%, and you can use your AVC for the remainder if you like. If your automatic lump sum and AVC total more than 25% of your overall LGPS pot, you can use the rest of the AVC to purchase extra annual pension.

Thank you @Silvertabby for your earlier reply - you were spot on, thanks