Slight delay in taking my LGPS pension any penalties ?

Tiggy777

Hi all
After much consideration I have finally decided to retire having just turned 58.
I have been paying into the LGPS since 18 with no breaks in service and for the last 3 years have been saving most of my salary into an AVC through a company link to the LGPS.
As I have some saving I thought about delaying taking my pension until I am ever 59 or 60 as the retirement age for most of my pension is 60, so the percentage reductions on this element will be nil.
My plan is to take the maximum amount tax free and then a pension...my question is in doing this are there any penalties applied by the LGPS (if I delay until 59 or 60) to make this less attractive then just taking when I leave (58) ? 
I will also have a balance form the AVC (approx. £25k)  which I can't take as part of the 25% so wondered what is the best option would be for this balance.
Would really appreciate and advice or suggestions on these issues.
Many thanks for your help and time
Regards
Tiggy

hyubh

There's no special benefit in retiring from active rather than deferred, if that's what you mean. Public sector pensions increase in deferment identically to how they increase in payment, i.e. the difference in your pension at 60 if you took it at 60 vs. having taken it at 58 would simply lie in the lack an actuarial reduction for the rule of 85-protected tranche.

saucer

Tiggy777 said:

I will also have a balance form the AVC (approx. £25k)  which I can't take as part of the 25% so wondered what is the best option would be for this balance.

I'm not sure about this bit.  Why can't you take the AVC as part of the 25% tax free part?  One of the great advantages of having an AVC alongside a LGPS pension is that it can be taken completely tax free as long as it doesn't amount to more than 25% of the total pension benefit, as outlined here https://www.lgpsmember.org/more/AVCoptions.php
You have to take it at the same time you take your pension but other than that it is, as they say, a no brainer

AlanP_2

saucer said:

Tiggy777 said:

I will also have a balance form the AVC (approx. £25k)  which I can't take as part of the 25% so wondered what is the best option would be for this balance.

I'm not sure about this bit.  Why can't you take the AVC as part of the 25% tax free part?  One of the great advantages of having an AVC alongside a LGPS pension is that it can be taken completely tax free as long as it doesn't amount to more than 25% of the total pension benefit, as outlined here https://www.lgpsmember.org/more/AVCoptions.php
You have to take it at the same time you take your pension but other than that it is, as they say, a no brainer

I read that as having 25K left over in the AVC account once the maximun 25% calculation had been done

If that is the case I think the options are to transfer out to a personal pension and then it is taxable when withdrawn or use it to purchase additional annual LGPS pension.

Personally I would try and defer taking the LGPS until Age 60 to minimse the actuarial reduction, then take maximum 25% TFLS to use up as much of the AVC fund as possible and use the balance to increase LGPS annual pension. I would move the AVC invrestments into cash / near cash to minimise any market risk and get a quote for what the 25K would "buy" as pension.

Silvertabby

AlanP_2 said:

saucer said:

Tiggy777 said:

I will also have a balance form the AVC (approx. £25k)  which I can't take as part of the 25% so wondered what is the best option would be for this balance.

I'm not sure about this bit.  Why can't you take the AVC as part of the 25% tax free part?  One of the great advantages of having an AVC alongside a LGPS pension is that it can be taken completely tax free as long as it doesn't amount to more than 25% of the total pension benefit, as outlined here https://www.lgpsmember.org/more/AVCoptions.php
You have to take it at the same time you take your pension but other than that it is, as they say, a no brainer

I read that as having 25K left over in the AVC account once the maximun 25% calculation had been done

If that is the case I think the options are to transfer out to a personal pension and then it is taxable when withdrawn or use it to purchase additional annual LGPS pension.

Personally I would try and defer taking the LGPS until Age 60 to minimse the actuarial reduction, then take maximum 25% TFLS to use up as much of the AVC fund as possible and use the balance to increase LGPS annual pension. I would move the AVC invrestments into cash / near cash to minimise any market risk and get a quote for what the 25K would "buy" as pension.

As Alan says.  The factors for using the (residual or whole) AVC funds to buy extra LGPS benefits are almost certainly more generous than any annuity option available on the open market.  However, if OP wants to take all of her AVC as cash, then she would have to transfer the residual AVC to a drawdown plan - noting that if the full amount is taken in one go, then it won't be tax free. 

Speaking from a LGPS (retired) administrators point of view, transferring out some of the AVC fund complicates and extends the retirement process.  Considerably.

saucer

AlanP_2 said:

saucer said:

Tiggy777 said:

I will also have a balance form the AVC (approx. £25k)  which I can't take as part of the 25% ....

I'm not sure about this bit.  Why can't you take the AVC as part of the 25% tax free part?  One of the great advantages of having an AVC alongside 

I read that as having 25K left over in the AVC account once the maximun 25% calculation had been done.

Of course. That makes sense :-)

Tiggy777

Silvertabby said:

AlanP_2 said:

saucer said:

Tiggy777 said:

I will also have a balance form the AVC (approx. £25k)  which I can't take as part of the 25% so wondered what is the best option would be for this balance.

I'm not sure about this bit.  Why can't you take the AVC as part of the 25% tax free part?  One of the great advantages of having an AVC alongside a LGPS pension is that it can be taken completely tax free as long as it doesn't amount to more than 25% of the total pension benefit, as outlined here https://www.lgpsmember.org/more/AVCoptions.php
You have to take it at the same time you take your pension but other than that it is, as they say, a no brainer

I read that as having 25K left over in the AVC account once the maximun 25% calculation had been done

If that is the case I think the options are to transfer out to a personal pension and then it is taxable when withdrawn or use it to purchase additional annual LGPS pension.

Personally I would try and defer taking the LGPS until Age 60 to minimse the actuarial reduction, then take maximum 25% TFLS to use up as much of the AVC fund as possible and use the balance to increase LGPS annual pension. I would move the AVC invrestments into cash / near cash to minimise any market risk and get a quote for what the 25K would "buy" as pension.

As Alan says.  The factors for using the (residual or whole) AVC funds to buy extra LGPS benefits are almost certainly more generous than any annuity option available on the open market.  However, if OP wants to take all of her AVC as cash, then she would have to transfer the residual AVC to a drawdown plan - noting that if the full amount is taken in one go, then it won't be tax free. 

Speaking from a LGPS (retired) administrators point of view, transferring out some of the AVC fund complicates and extends the retirement process.  Considerably.

Hi all...really appreciate all the advice..just confirming my plan* is all about taking the maximum tax free amount (ie 25% of my pension fund)......and getting an annual pension based on my final salary.  I just wanted to ensure if I delayed (until I was 60..2 years away) I wasn't hit with any financial penalties based on the delay.
Guess it whether to take the money now slight reduced or a higher figure in 2 years time (noting I would already have 2 years of pension 'in the bank'0
I also like Silvertabby's suggestion about using the residual from my AVC for a drawing down plan..(would that be through an external company or my LGPS ?)
Happy cat (I think)

Silvertabby

Tiggy777 said:

Silvertabby said:

AlanP_2 said:

saucer said:

Tiggy777 said:

I will also have a balance form the AVC (approx. £25k)  which I can't take as part of the 25% so wondered what is the best option would be for this balance.

I'm not sure about this bit.  Why can't you take the AVC as part of the 25% tax free part?  One of the great advantages of having an AVC alongside a LGPS pension is that it can be taken completely tax free as long as it doesn't amount to more than 25% of the total pension benefit, as outlined here https://www.lgpsmember.org/more/AVCoptions.php
You have to take it at the same time you take your pension but other than that it is, as they say, a no brainer

I read that as having 25K left over in the AVC account once the maximun 25% calculation had been done

If that is the case I think the options are to transfer out to a personal pension and then it is taxable when withdrawn or use it to purchase additional annual LGPS pension.

Personally I would try and defer taking the LGPS until Age 60 to minimse the actuarial reduction, then take maximum 25% TFLS to use up as much of the AVC fund as possible and use the balance to increase LGPS annual pension. I would move the AVC invrestments into cash / near cash to minimise any market risk and get a quote for what the 25K would "buy" as pension.

As Alan says.  The factors for using the (residual or whole) AVC funds to buy extra LGPS benefits are almost certainly more generous than any annuity option available on the open market.  However, if OP wants to take all of her AVC as cash, then she would have to transfer the residual AVC to a drawdown plan - noting that if the full amount is taken in one go, then it won't be tax free. 

Speaking from a LGPS (retired) administrators point of view, transferring out some of the AVC fund complicates and extends the retirement process.  Considerably.

Hi all...really appreciate all the advice..just confirming my plan* is all about taking the maximum tax free amount (ie 25% of my pension fund)......and getting an annual pension based on my final salary.  I just wanted to ensure if I delayed (until I was 60..2 years away) I wasn't hit with any financial penalties based on the delay.
Guess it whether to take the money now slight reduced or a higher figure in 2 years time (noting I would already have 2 years of pension 'in the bank'0
I also like Silvertabby's suggestion about using the residual from my AVC for a drawing down plan..(would that be through an external company or my LGPS ?)
Happy cat (I think)

You'd have to transfer your residual to a drawdown plan with your AVC provider or another, open market, provider.  It's not something the LGPS can/will do.  Remember to factor in additional admin charges.

Tiggy777

Silvertabby said:

Tiggy777 said:

Silvertabby said:

AlanP_2 said:

saucer said:

Tiggy777 said:

I will also have a balance form the AVC (approx. £25k)  which I can't take as part of the 25% so wondered what is the best option would be for this balance.

I'm not sure about this bit.  Why can't you take the AVC as part of the 25% tax free part?  One of the great advantages of having an AVC alongside a LGPS pension is that it can be taken completely tax free as long as it doesn't amount to more than 25% of the total pension benefit, as outlined here https://www.lgpsmember.org/more/AVCoptions.php
You have to take it at the same time you take your pension but other than that it is, as they say, a no brainer

I read that as having 25K left over in the AVC account once the maximun 25% calculation had been done

If that is the case I think the options are to transfer out to a personal pension and then it is taxable when withdrawn or use it to purchase additional annual LGPS pension.

Personally I would try and defer taking the LGPS until Age 60 to minimse the actuarial reduction, then take maximum 25% TFLS to use up as much of the AVC fund as possible and use the balance to increase LGPS annual pension. I would move the AVC invrestments into cash / near cash to minimise any market risk and get a quote for what the 25K would "buy" as pension.

As Alan says.  The factors for using the (residual or whole) AVC funds to buy extra LGPS benefits are almost certainly more generous than any annuity option available on the open market.  However, if OP wants to take all of her AVC as cash, then she would have to transfer the residual AVC to a drawdown plan - noting that if the full amount is taken in one go, then it won't be tax free. 

Speaking from a LGPS (retired) administrators point of view, transferring out some of the AVC fund complicates and extends the retirement process.  Considerably.

Hi all...really appreciate all the advice..just confirming my plan* is all about taking the maximum tax free amount (ie 25% of my pension fund)......and getting an annual pension based on my final salary.  I just wanted to ensure if I delayed (until I was 60..2 years away) I wasn't hit with any financial penalties based on the delay.
Guess it whether to take the money now slight reduced or a higher figure in 2 years time (noting I would already have 2 years of pension 'in the bank'0
I also like Silvertabby's suggestion about using the residual from my AVC for a drawing down plan..(would that be through an external company or my LGPS ?)
Happy cat (I think)

You'd have to transfer your residual to a drawdown plan with your AVC provider or another, open market, provider.  It's not something the LGPS can/will do.  Remember to factor in additional admin charges.

Silvertabby Many thanks for confirming this and the excellent advice over the pass couple of years .
Tiggy

Silvertabby

Tiggy777 said:

Silvertabby said:

Tiggy777 said:

Silvertabby said:

AlanP_2 said:

saucer said:

Tiggy777 said:

I will also have a balance form the AVC (approx. £25k)  which I can't take as part of the 25% so wondered what is the best option would be for this balance.

I'm not sure about this bit.  Why can't you take the AVC as part of the 25% tax free part?  One of the great advantages of having an AVC alongside a LGPS pension is that it can be taken completely tax free as long as it doesn't amount to more than 25% of the total pension benefit, as outlined here https://www.lgpsmember.org/more/AVCoptions.php
You have to take it at the same time you take your pension but other than that it is, as they say, a no brainer

I read that as having 25K left over in the AVC account once the maximun 25% calculation had been done

If that is the case I think the options are to transfer out to a personal pension and then it is taxable when withdrawn or use it to purchase additional annual LGPS pension.

Personally I would try and defer taking the LGPS until Age 60 to minimse the actuarial reduction, then take maximum 25% TFLS to use up as much of the AVC fund as possible and use the balance to increase LGPS annual pension. I would move the AVC invrestments into cash / near cash to minimise any market risk and get a quote for what the 25K would "buy" as pension.

As Alan says.  The factors for using the (residual or whole) AVC funds to buy extra LGPS benefits are almost certainly more generous than any annuity option available on the open market.  However, if OP wants to take all of her AVC as cash, then she would have to transfer the residual AVC to a drawdown plan - noting that if the full amount is taken in one go, then it won't be tax free. 

Speaking from a LGPS (retired) administrators point of view, transferring out some of the AVC fund complicates and extends the retirement process.  Considerably.

Hi all...really appreciate all the advice..just confirming my plan* is all about taking the maximum tax free amount (ie 25% of my pension fund)......and getting an annual pension based on my final salary.  I just wanted to ensure if I delayed (until I was 60..2 years away) I wasn't hit with any financial penalties based on the delay.
Guess it whether to take the money now slight reduced or a higher figure in 2 years time (noting I would already have 2 years of pension 'in the bank'0
I also like Silvertabby's suggestion about using the residual from my AVC for a drawing down plan..(would that be through an external company or my LGPS ?)
Happy cat (I think)

You'd have to transfer your residual to a drawdown plan with your AVC provider or another, open market, provider.  It's not something the LGPS can/will do.  Remember to factor in additional admin charges.

Silvertabby Many thanks for confirming this and the excellent advice over the pass couple of years .
Tiggy

You're very welcome - but, please, it's information rather than advice .  You'll get me into trouble ! 

Tiggy777

Silvertabby said:

Tiggy777 said:

Silvertabby said:

Tiggy777 said:

Silvertabby said:

AlanP_2 said:

saucer said:

Tiggy777 said:

I will also have a balance form the AVC (approx. £25k)  which I can't take as part of the 25% so wondered what is the best option would be for this balance.

I'm not sure about this bit.  Why can't you take the AVC as part of the 25% tax free part?  One of the great advantages of having an AVC alongside a LGPS pension is that it can be taken completely tax free as long as it doesn't amount to more than 25% of the total pension benefit, as outlined here https://www.lgpsmember.org/more/AVCoptions.php
You have to take it at the same time you take your pension but other than that it is, as they say, a no brainer

I read that as having 25K left over in the AVC account once the maximun 25% calculation had been done

If that is the case I think the options are to transfer out to a personal pension and then it is taxable when withdrawn or use it to purchase additional annual LGPS pension.

Personally I would try and defer taking the LGPS until Age 60 to minimse the actuarial reduction, then take maximum 25% TFLS to use up as much of the AVC fund as possible and use the balance to increase LGPS annual pension. I would move the AVC invrestments into cash / near cash to minimise any market risk and get a quote for what the 25K would "buy" as pension.

As Alan says.  The factors for using the (residual or whole) AVC funds to buy extra LGPS benefits are almost certainly more generous than any annuity option available on the open market.  However, if OP wants to take all of her AVC as cash, then she would have to transfer the residual AVC to a drawdown plan - noting that if the full amount is taken in one go, then it won't be tax free. 

Speaking from a LGPS (retired) administrators point of view, transferring out some of the AVC fund complicates and extends the retirement process.  Considerably.

Hi all...really appreciate all the advice..just confirming my plan* is all about taking the maximum tax free amount (ie 25% of my pension fund)......and getting an annual pension based on my final salary.  I just wanted to ensure if I delayed (until I was 60..2 years away) I wasn't hit with any financial penalties based on the delay.
Guess it whether to take the money now slight reduced or a higher figure in 2 years time (noting I would already have 2 years of pension 'in the bank'0
I also like Silvertabby's suggestion about using the residual from my AVC for a drawing down plan..(would that be through an external company or my LGPS ?)
Happy cat (I think)

You'd have to transfer your residual to a drawdown plan with your AVC provider or another, open market, provider.  It's not something the LGPS can/will do.  Remember to factor in additional admin charges.

Silvertabby Many thanks for confirming this and the excellent advice over the pass couple of years .
Tiggy

You're very welcome - but, please, it's information rather than advice .  You'll get me into trouble ! 

Silvertabby...yes of course it's not advice as you say but information