LGPS with AVC...take 25% tax free

Silvertabby

Tiggy777 said:

Silvertabby said:

Tiggy777 said:

Silvertabby said:

Yes.  Although most people use in house AVCs in order to maximise their tax free cash (tax relief in, tax free out) you do have the option of buying extra index linked LGPS pension with some or all of your AVC fund.

The factors aren't the same as the transfer in factors, so you would have to ask your LGPS for an estimate - but the extra pension bought will be far higher than an annuity pension purchased on the open market.

Hi Silvertabby.... great to hear from you and thanks for the 'information'... just wondered if there is a limit to how much 'extra index linked LGPS pension you can buy ?  and when you say but the extra pension bought will be far higher than an annuity pension purchased on the open market.  Can I just check you are referring to the rates paid/returns.  Many thanks again.  Kind regards  Tiggy

Hi Tiggy.  You are very welcome !  If there is a limit to the amount of pension you can buy with your AVC fund, I never came across it in my 20 years, so it must be substantial.  Your LGPS should be able to tell you if a limit exists or not.

Depending on when you started your AVCs, you will be given the option of buying additional service (if you started your AVC before Nov 2001) or a top-up pension with the LGPS.  The top-up pension used to be called a LGPS annuity (may still be by the administrators) but it used to cause consternation due to normal annuities having a bad name.

Yes, I do mean rates paid/returns.

Hi Silvertabby thanks so much for the reply. 
I started paying into the LGPS when I was 18 back in 1979 but only started to pay into an AVC from 2017.  My provider 'suggest' I could buy through them if required but I am not sure now based on reference to starting an AVC from 2001.  That said 'my provider' has given me some much contradictory information it's mind blowing  
As always really appreciate the informative information you give me
Thanks
Tiggy

By 'provider' do you mean your AVC provider?  If so, giving you details of what they could offer you is par for the course.  In your case, as you started your AVC contract after 2001, you still have the option of using some or all of your AVC to buy a top-up pension in the LGPS.  At a better rate than your AVC provider can offer, but the Law says that you must be given all possible options - including the open market - to choose from.

I recall one case.  The residual AVC fund (ie, over the amount that could be taken as tax free cash) wasn't huge - well under £10K - and I gave the member her options.  Added pension with the LGPS, an annuity from the Pru (much less than the LGPS offering), or open market (the latter being that the member would transfer her AVC fund to another pension provider and obtain her own figures).
The paperwork came back ticked 'open market'.  This was so unusual, I rang the lady to ask if she had ticked the wrong box in mistake.  No, she hadn't.  This was more of a faff for me, as I then had to make a special request to the Pru to disinvest just the amount I needed to pay as tax free cash, leaving the remainder to be transferred by the member.

Had got as far as doing the final calculations, writing the letter, preparing payment - when the member rang me in a right tizz.  Seems no other pension fund would accept such a small transfer, and so she now wanted the extra LGPS pension.  Apparently, she went for the open market because she had been told 'by someone in the know that you always got more on the open market'.

Unpicking that lot wasn't a 5 minute job - plus I then had to wait for the Pru to disinvest the rest of the money before I could do the new calculations.  Obviously, the lump sum payment didn't go ahead that week - and she wrote a letter of complaint to my manager griping about her 'late' payment.  Happy days !
 

Tiggy777

Silvertabby said:

Tiggy777 said:

Silvertabby said:

Tiggy777 said:

Silvertabby said:

Yes.  Although most people use in house AVCs in order to maximise their tax free cash (tax relief in, tax free out) you do have the option of buying extra index linked LGPS pension with some or all of your AVC fund.

The factors aren't the same as the transfer in factors, so you would have to ask your LGPS for an estimate - but the extra pension bought will be far higher than an annuity pension purchased on the open market.

Hi Silvertabby.... great to hear from you and thanks for the 'information'... just wondered if there is a limit to how much 'extra index linked LGPS pension you can buy ?  and when you say but the extra pension bought will be far higher than an annuity pension purchased on the open market.  Can I just check you are referring to the rates paid/returns.  Many thanks again.  Kind regards  Tiggy

Hi Tiggy.  You are very welcome !  If there is a limit to the amount of pension you can buy with your AVC fund, I never came across it in my 20 years, so it must be substantial.  Your LGPS should be able to tell you if a limit exists or not.

Depending on when you started your AVCs, you will be given the option of buying additional service (if you started your AVC before Nov 2001) or a top-up pension with the LGPS.  The top-up pension used to be called a LGPS annuity (may still be by the administrators) but it used to cause consternation due to normal annuities having a bad name.

Yes, I do mean rates paid/returns.

Hi Silvertabby thanks so much for the reply. 
I started paying into the LGPS when I was 18 back in 1979 but only started to pay into an AVC from 2017.  My provider 'suggest' I could buy through them if required but I am not sure now based on reference to starting an AVC from 2001.  That said 'my provider' has given me some much contradictory information it's mind blowing  
As always really appreciate the informative information you give me
Thanks
Tiggy

By 'provider' do you mean your AVC provider?  If so, giving you details of what they could offer you is par for the course.  In your case, as you started your AVC contract after 2001, you still have the option of using some or all of your AVC to buy a top-up pension in the LGPS.  At a better rate than your AVC provider can offer, but the Law says that you must be given all possible options - including the open market - to choose from.

I recall one case.  The residual AVC fund (ie, over the amount that could be taken as tax free cash) wasn't huge - well under £10K - and I gave the member her options.  Added pension with the LGPS, an annuity from the Pru (much less than the LGPS offering), or open market (the latter being that the member would transfer her AVC fund to another pension provider and obtain her own figures).
The paperwork came back ticked 'open market'.  This was so unusual, I rang the lady to ask if she had ticked the wrong box in mistake.  No, she hadn't.  This was more of a faff for me, as I then had to make a special request to the Pru to disinvest just the amount I needed to pay as tax free cash, leaving the remainder to be transferred by the member.

Had got as far as doing the final calculations, writing the letter, preparing payment - when the member rang me in a right tizz.  Seems no other pension fund would accept such a small transfer, and so she now wanted the extra LGPS pension.  Apparently, she went for the open market because she had been told 'by someone in the know that you always got more on the open market'.

Unpicking that lot wasn't a 5 minute job - plus I then had to wait for the Pru to disinvest the rest of the money before I could do the new calculations.  Obviously, the lump sum payment didn't go ahead that week - and she wrote a letter of complaint to my manager griping about her 'late' payment.  Happy days !
 

Hi Silvertabby
Many thanks for such a great reply....
By provider I was referring to my LGPS (sorry for not being clear)
I think my AVC will be about £160K and liked the idea of 'simply' putting if in the bank and drawing on it in retirement (tax free).  Think my 25% tax free sum would be about £145K (when taking my total fund into consideration)
However I am now aware of deflation and putting it in the bank over time might not be the best thing to do... so thinking should I keep a pot to last me 5 years and invest the rest* in a S&S ISA as suggested in an earlier post .... or use the rest* to buy extra LGPS as this with have a link to the retail price index so will keep up with inflation (I think)
Actually I will get a lump sum of about £40K away from my LGPS so could in fact use the whole £160K to buy extra LGPS pension...big question is what will this give me in terms of extra pension per year and who would I find that out.
Really appreciate the information
Regards
Tiggy

Silvertabby

Tiggy777 said:

Silvertabby said:

Tiggy777 said:

Silvertabby said:

Tiggy777 said:

Silvertabby said:

Yes.  Although most people use in house AVCs in order to maximise their tax free cash (tax relief in, tax free out) you do have the option of buying extra index linked LGPS pension with some or all of your AVC fund.

The factors aren't the same as the transfer in factors, so you would have to ask your LGPS for an estimate - but the extra pension bought will be far higher than an annuity pension purchased on the open market.

Hi Silvertabby.... great to hear from you and thanks for the 'information'... just wondered if there is a limit to how much 'extra index linked LGPS pension you can buy ?  and when you say but the extra pension bought will be far higher than an annuity pension purchased on the open market.  Can I just check you are referring to the rates paid/returns.  Many thanks again.  Kind regards  Tiggy

Hi Tiggy.  You are very welcome !  If there is a limit to the amount of pension you can buy with your AVC fund, I never came across it in my 20 years, so it must be substantial.  Your LGPS should be able to tell you if a limit exists or not.

Depending on when you started your AVCs, you will be given the option of buying additional service (if you started your AVC before Nov 2001) or a top-up pension with the LGPS.  The top-up pension used to be called a LGPS annuity (may still be by the administrators) but it used to cause consternation due to normal annuities having a bad name.

Yes, I do mean rates paid/returns.

Hi Silvertabby thanks so much for the reply. 
I started paying into the LGPS when I was 18 back in 1979 but only started to pay into an AVC from 2017.  My provider 'suggest' I could buy through them if required but I am not sure now based on reference to starting an AVC from 2001.  That said 'my provider' has given me some much contradictory information it's mind blowing  
As always really appreciate the informative information you give me
Thanks
Tiggy

By 'provider' do you mean your AVC provider?  If so, giving you details of what they could offer you is par for the course.  In your case, as you started your AVC contract after 2001, you still have the option of using some or all of your AVC to buy a top-up pension in the LGPS.  At a better rate than your AVC provider can offer, but the Law says that you must be given all possible options - including the open market - to choose from.

I recall one case.  The residual AVC fund (ie, over the amount that could be taken as tax free cash) wasn't huge - well under £10K - and I gave the member her options.  Added pension with the LGPS, an annuity from the Pru (much less than the LGPS offering), or open market (the latter being that the member would transfer her AVC fund to another pension provider and obtain her own figures).
The paperwork came back ticked 'open market'.  This was so unusual, I rang the lady to ask if she had ticked the wrong box in mistake.  No, she hadn't.  This was more of a faff for me, as I then had to make a special request to the Pru to disinvest just the amount I needed to pay as tax free cash, leaving the remainder to be transferred by the member.

Had got as far as doing the final calculations, writing the letter, preparing payment - when the member rang me in a right tizz.  Seems no other pension fund would accept such a small transfer, and so she now wanted the extra LGPS pension.  Apparently, she went for the open market because she had been told 'by someone in the know that you always got more on the open market'.

Unpicking that lot wasn't a 5 minute job - plus I then had to wait for the Pru to disinvest the rest of the money before I could do the new calculations.  Obviously, the lump sum payment didn't go ahead that week - and she wrote a letter of complaint to my manager griping about her 'late' payment.  Happy days !
 

Hi Silvertabby
Many thanks for such a great reply....
By provider I was referring to my LGPS (sorry for not being clear)
I think my AVC will be about £160K and liked the idea of 'simply' putting if in the bank and drawing on it in retirement (tax free).  Think my 25% tax free sum would be about £145K (when taking my total fund into consideration)
However I am now aware of deflation and putting it in the bank over time might not be the best thing to do... so thinking should I keep a pot to last me 5 years and invest the rest* in a S&S ISA as suggested in an earlier post .... or use the rest* to buy extra LGPS as this with have a link to the retail price index so will keep up with inflation (I think)
Actually I will get a lump sum of about £40K away from my LGPS so could in fact use the whole £160K to buy extra LGPS pension...big question is what will this give me in terms of extra pension per year and who would I find that out.
Really appreciate the information
Regards
Tiggy

Anytime, Tiggy. 

There are a lot of factors involved in the AVC/buy top-up pension calculation, so this is something that only your LGPS can do.  I expect they may be running a limited service at the moment, for obvious reasons, but they may run a full estimate (with AVC options) once you are within 6 or 12 months of your chosen retirement date.

Simply transferring all of your AVC fund to a bank account is not a good idea, unless you are feeling particularly generous to the taxman! 

Tiggy777

Silvertabby said:

Tiggy777 said:

Silvertabby said:

Tiggy777 said:

Silvertabby said:

Tiggy777 said:

Silvertabby said:

Yes.  Although most people use in house AVCs in order to maximise their tax free cash (tax relief in, tax free out) you do have the option of buying extra index linked LGPS pension with some or all of your AVC fund.

The factors aren't the same as the transfer in factors, so you would have to ask your LGPS for an estimate - but the extra pension bought will be far higher than an annuity pension purchased on the open market.

Hi Silvertabby.... great to hear from you and thanks for the 'information'... just wondered if there is a limit to how much 'extra index linked LGPS pension you can buy ?  and when you say but the extra pension bought will be far higher than an annuity pension purchased on the open market.  Can I just check you are referring to the rates paid/returns.  Many thanks again.  Kind regards  Tiggy

Hi Tiggy.  You are very welcome !  If there is a limit to the amount of pension you can buy with your AVC fund, I never came across it in my 20 years, so it must be substantial.  Your LGPS should be able to tell you if a limit exists or not.

Depending on when you started your AVCs, you will be given the option of buying additional service (if you started your AVC before Nov 2001) or a top-up pension with the LGPS.  The top-up pension used to be called a LGPS annuity (may still be by the administrators) but it used to cause consternation due to normal annuities having a bad name.

Yes, I do mean rates paid/returns.

Hi Silvertabby thanks so much for the reply. 
I started paying into the LGPS when I was 18 back in 1979 but only started to pay into an AVC from 2017.  My provider 'suggest' I could buy through them if required but I am not sure now based on reference to starting an AVC from 2001.  That said 'my provider' has given me some much contradictory information it's mind blowing  
As always really appreciate the informative information you give me
Thanks
Tiggy

By 'provider' do you mean your AVC provider?  If so, giving you details of what they could offer you is par for the course.  In your case, as you started your AVC contract after 2001, you still have the option of using some or all of your AVC to buy a top-up pension in the LGPS.  At a better rate than your AVC provider can offer, but the Law says that you must be given all possible options - including the open market - to choose from.

I recall one case.  The residual AVC fund (ie, over the amount that could be taken as tax free cash) wasn't huge - well under £10K - and I gave the member her options.  Added pension with the LGPS, an annuity from the Pru (much less than the LGPS offering), or open market (the latter being that the member would transfer her AVC fund to another pension provider and obtain her own figures).
The paperwork came back ticked 'open market'.  This was so unusual, I rang the lady to ask if she had ticked the wrong box in mistake.  No, she hadn't.  This was more of a faff for me, as I then had to make a special request to the Pru to disinvest just the amount I needed to pay as tax free cash, leaving the remainder to be transferred by the member.

Had got as far as doing the final calculations, writing the letter, preparing payment - when the member rang me in a right tizz.  Seems no other pension fund would accept such a small transfer, and so she now wanted the extra LGPS pension.  Apparently, she went for the open market because she had been told 'by someone in the know that you always got more on the open market'.

Unpicking that lot wasn't a 5 minute job - plus I then had to wait for the Pru to disinvest the rest of the money before I could do the new calculations.  Obviously, the lump sum payment didn't go ahead that week - and she wrote a letter of complaint to my manager griping about her 'late' payment.  Happy days !
 

Hi Silvertabby
Many thanks for such a great reply....
By provider I was referring to my LGPS (sorry for not being clear)
I think my AVC will be about £160K and liked the idea of 'simply' putting if in the bank and drawing on it in retirement (tax free).  Think my 25% tax free sum would be about £145K (when taking my total fund into consideration)
However I am now aware of deflation and putting it in the bank over time might not be the best thing to do... so thinking should I keep a pot to last me 5 years and invest the rest* in a S&S ISA as suggested in an earlier post .... or use the rest* to buy extra LGPS as this with have a link to the retail price index so will keep up with inflation (I think)
Actually I will get a lump sum of about £40K away from my LGPS so could in fact use the whole £160K to buy extra LGPS pension...big question is what will this give me in terms of extra pension per year and who would I find that out.
Really appreciate the information
Regards
Tiggy

Anytime, Tiggy. 

There are a lot of factors involved in the AVC/buy top-up pension calculation, so this is something that only your LGPS can do.  I expect they may be running a limited service at the moment, for obvious reasons, but they may run a full estimate (with AVC options) once you are within 6 or 12 months of your chosen retirement date.

Simply transferring all of your AVC fund to a bank account is not a good idea, unless you are feeling particularly generous to the taxman! 

Hi Silvertabby... as always many thanks for the information...I will contact them and see what the options are. 
Bye for 'now' tiggy

jamjar92

Tiggy777, Could you delay 2 years, until 60, or use other saving if you want to retire at 58.

I you will meet the 85 rule. https://www.lgpsmember.org/more/eightyfive.php

Your pre 2008 pension would not be reduced at all, only your 2008-2014, and post 2014 would. As Silvertabby says you then use your AVC to purchase more pension so it back up to normal retirement levels or keep some back if you want a bigger lump sum on top of your existing 40K.. The pension will get CPI increase each year. This to me would seem the more tax efficient way of doing things. This way you not need to worry about the low interest rates on savings, or what the markets are doing.