Possibly redundancy - LGPS AVC

collins74

Hello everyone

I have been in employed local government since late 99 and in the LGPS throughout  Currently earn £42600 and have been contributing to an AVC steadily increasing this to the current £670 per month before tax and NI savings - cost to me is £455.60.  It’s a salary sacrifice scheme.  The value of my AVC is currently £11300.

I am aged 46 this December and my plan was to retire at 60 hopefully with a £100,000 lump sum (My estimates and could be wholly wrong) from the AVC, a £13000 lump sum from the LGPS and around £21,000 per year based on an online calculator With 1% pay increases.   My wife and I are not due any inheritance.

I think my plans may change.  We have been made aware the Council I work for is facing a severe financial shortfall due to COVID-19 and we are facing a reorganisation with a possible redundancy scheme.  My guess is that this will probably be rolled out before or just after Christmas.

The rumour is that they may be looking to make savings around my grade and I am concerned where this may lead.  I could be worrying too soon but I would rather consider options in advance to make the right decision if that time comes.

Based on previous schemes redundancy has been enhanced to either 30 or 36 weeks pay at my council.  This would give me between £24000 and £30000 tax free.  This could be making a large assumption and it could be a less generous payout this time.

I am seriously considering upping my AVC in the next few months possibly to £1000 per month before tax and NI relief (cost to me £680) to maximise its potential and the time I may have left in the role to compensate if I am made redundant and am not able to find a new job with the salary I am on or as good a pension scheme.  However I am concerned that locking this extra couple of hundred pound per month into my AVC is not the right decision due to a possible impending redundancy and time without a job.  I can afford to do this by not saving as much elsewhere.  If I am not made redundant I would reduce it back to the £670 as we have home improvements that need to be funded if I stay in the role.

I would be really interested to hear people’s view here, I am not financially savvy as such and don’t really have anyone who I can approach as wise counsel.  I have summarised my position below and hope I have given enough background and facts for you form some opinions:

House value: £175000
Mortgage: £49000 £417 per month

Credits cards: nil
Loans: nil
Wifes car PCP £413 per month 2 years left.  I know this is something that could be looked at if I made redundant
Savings: £30000

I should add that my wife earns a reasonable salary and we should be able to survive on her wage alone but we would have to change our lifestyle to a large extent and more importantly not be able to help the kids if they go to uni.  We have two children aged 15 and 11.

I hope this isn’t a ridiculous question or I have missed anything out that I shouldn’t have done.

Thank you for taking the time to read this.

OldBeanz

You are in a steady job, have a good savings pot and enough income to survive. Councils will not be encouraged to make people redundant to add to any decimation in the private sector. Take a chill pill.

AlanP_2

OldBeanz said:

You are in a steady job, have a good savings pot and enough income to survive. Councils will not be encouraged to make people redundant to add to any decimation in the private sector. Take a chill pill.

They may not be encouraged but many will be forced to in my opinion.

C19 has cost them a lot, some of which is / will be made good by central government but a lot won't be.

Service reviews and staff reorgs ahead.

Durban

Normally , I would say up your contributions to the maximum you are allowed and can afford to take full advantage of the very good AVC scheme.  I myself pay as much as I can afford to and no you probably won't be able to beat the advantages anywhere else.

However , with the threat of redundancy and I believe it is a very real threat as councils, along with everyone else. are definitely going to have to tighten their belts even more ( if that is possible ), I don't think that I would.  There are rumblings at my own place of work about serious cuts coming and I don't work for a council but am in the LGPS scheme and I have always thought of my job being one of the safest

The problem is , I think for everyone being made redundant , there are going to be thousands more and I think that it is going to be very difficult to get another job even if you are very skilled in the next couple of years. 

The problem with the AVC's is that you have to take them when you take your LGPS main scheme pension and you can only take that at your NRA which for you is around 67 or 68 otherwise you will get penalised very heavily for taking it early although you have worked out that you can take yours at 60 and a decent amount.  Can you double check those and get an estimate from your scheme administrators?

So, although the advantages are fantastic , with possible redundancy hanging over my head , I would be more inclined to save any spare money in an emergency fund.  I would keep your current contribution going but save the rest.

If the threat of redundancy recedes , then up the contributions and maybe put what you have saved also into them within the limits allowed.  It really is so good.  

Worrying times for a lot of people 

collins74

Thanks everyone for your comments. Understand this may seem a bit strange to some with others not having a job To go back to, but it’s a pension planning board etc.  I’ve been looking at things again and I will increase it but only another £150ish gross. I’ll keep it under review and with AVC wise you can change it quicker than through the usual Prudential route.  

Stay safe