LGPS AVC to annuity

k6chris

I have a quote from my LGPS provider to take my pension early, at age 56.  In the letter detailing my AVC options, I cannot take it all as a TFLS and there is a line that says:

"The remaining AVC fund of £5380.24 would purchace an annuity withing the LGPS scheme of £232.96 per annum."

This seems to be offering me an annuity, from age 56, at a rate of 4.3%.   This strikes me as a great deal, in effect an actual SWR of more than 4%!  Two questions please.

Is this rate likely to apply if I use all my AVC to buy a scheme annuity, ie I do not take any TFLS?

Is the annuity index linked in the same way as the main DB scheme?

Thanks

Silvertabby

Yes and yes.  The use of the word 'annuity' used to put the wind up some people - but the factors used by the LGPS have always been (at least in my time) much more generous than anything available on the open market.

OldBeanz

Interesting. Would the rate be better if the OP was 65?

Silvertabby

OldBeanz said:

Interesting. Would the rate be better if the OP was 65?

Yes - the factors are age related.

Dox

OldBeanz said:

Interesting. Would the rate be better if the OP was 65?

Most schemes provide better annuity rates than commercial providers, for the simple reason the scheme aims to provide retirement benefits for members, rather than making a profit out of them.

OldBeanz

Interesting as I have a friend trying to max out his LGPS lump sum and he also has a DB pension which he could draw at 60 or draw next year which is a year early. He was struggling to reach his max 25% AVC lump sum as he only realised a few years ago he could do this and only works part time so doesn't pay much tax. I will get him to pay into his SIPP this year then draw his other pension early to pay into his AVC as he was concerned that he may over or undershoot his AVC. This should put his mind to rest.