LGPS AVC is it part of DB pension

OldBeanz

Been paying most of the wife's salary into her pension for most of the past few years. She earns just over the tax limit so she has paid any taxable income into her LGPS AVC, marriage allowance given to me, with the rest, £8k-> £10k, into her SIPP.
She intends taking her LGPS pension together with her AVC in a few years when she retires.
My thoughts today are that she could start drawing the SIPP (she's past 55 ) taking £12.5k +25% (presumably I could give my marriage allowance to her as a 20% tax payer on top) and paying all her salary into her LGPS pension (non Sal Sac). I take it her AVC is included as part of a DB scheme thereby she would not be limited to only contributing £4k to any pension?

Linton

According to https://www.pru.co.uk/pdf/LAVK10054.pdf P17 the MPAA does restrict what can be contributed to an LGPS AVC in Scotland, so presumably not in England.
The question has been raised before:  https://forums.moneysavingexpert.com/discussion/5695603/lgps-money-purchase-annual-allowance-avc/p1 .  In that thread Silvertabby, the resident LGPS expert,  suggested that one should check with the LGPS administrator.

hyubh

OldBeanz said:

Been paying most of the wife's salary into her pension for most of the past few years. She earns just over the tax limit so she has paid any taxable income into her LGPS AVC, marriage allowance given to me, with the rest, £8k-> £10k, into her SIPP.
She intends taking her LGPS pension together with her AVC in a few years when she retires.
My thoughts today are that she could start drawing the SIPP (she's past 55 ) taking £12.5k +25% (presumably I could give my marriage allowance to her as a 20% tax payer on top) and paying all her salary into her LGPS pension (non Sal Sac). I take it her AVC is included as part of a DB scheme thereby she would not be limited to only contributing £4k to any pension?

DB contributions unaffected (whether standard or APC), AVC contributions being in relation to a money purchase pension are. Same as a regular annual allowance calculation for an LGPS member with an open AVC (you first calculate the increase in notional value of the DB side, then add on any AVC contributions).

OldBeanz

hyubh said:

OldBeanz said:

Been paying most of the wife's salary into her pension for most of the past few years. She earns just over the tax limit so she has paid any taxable income into her LGPS AVC, marriage allowance given to me, with the rest, £8k-> £10k, into her SIPP.
She intends taking her LGPS pension together with her AVC in a few years when she retires.
My thoughts today are that she could start drawing the SIPP (she's past 55 ) taking £12.5k +25% (presumably I could give my marriage allowance to her as a 20% tax payer on top) and paying all her salary into her LGPS pension (non Sal Sac). I take it her AVC is included as part of a DB scheme thereby she would not be limited to only contributing £4k to any pension?

DB contributions unaffected (whether standard or APC), AVC contributions being in relation to a money purchase pension are. Same as a regular annual allowance calculation for an LGPS member with an open AVC (you first calculate the increase in notional value of the DB side, then add on any AVC contributions).

For clarification. This is ok then as the AVCs are to a DB pension.

OldBeanz

Found this on a Pru web site
"Members then need to tell any other pension scheme that they are an active member of, that they have flexibly accessed their pension savings, but excluding any DB only schemes. This notification must be provided within 91 days of receiving the statement or within 91 days of becoming an active member, whichever is the later."
So that would appear to suggest that the wife would not need to tell the LGPS.

hyubh

OldBeanz said:

hyubh said:

OldBeanz said:

Been paying most of the wife's salary into her pension for most of the past few years. She earns just over the tax limit so she has paid any taxable income into her LGPS AVC, marriage allowance given to me, with the rest, £8k-> £10k, into her SIPP.
She intends taking her LGPS pension together with her AVC in a few years when she retires.
My thoughts today are that she could start drawing the SIPP (she's past 55 ) taking £12.5k +25% (presumably I could give my marriage allowance to her as a 20% tax payer on top) and paying all her salary into her LGPS pension (non Sal Sac). I take it her AVC is included as part of a DB scheme thereby she would not be limited to only contributing £4k to any pension?

DB contributions unaffected (whether standard or APC), AVC contributions being in relation to a money purchase pension are. Same as a regular annual allowance calculation for an LGPS member with an open AVC (you first calculate the increase in notional value of the DB side, then add on any AVC contributions).

For clarification. This is ok then as the AVCs are to a DB pension.

I'll be honest, I'm not sure now what your actual question is. I thought it was about still contributing to the AVC after drawing from the SIPP...? In which case she would be limited by the MPAA.

OldBeanz

hyubh said:

OldBeanz said:

hyubh said:

OldBeanz said:

Been paying most of the wife's salary into her pension for most of the past few years. She earns just over the tax limit so she has paid any taxable income into her LGPS AVC, marriage allowance given to me, with the rest, £8k-> £10k, into her SIPP.
She intends taking her LGPS pension together with her AVC in a few years when she retires.
My thoughts today are that she could start drawing the SIPP (she's past 55 ) taking £12.5k +25% (presumably I could give my marriage allowance to her as a 20% tax payer on top) and paying all her salary into her LGPS pension (non Sal Sac). I take it her AVC is included as part of a DB scheme thereby she would not be limited to only contributing £4k to any pension?

DB contributions unaffected (whether standard or APC), AVC contributions being in relation to a money purchase pension are. Same as a regular annual allowance calculation for an LGPS member with an open AVC (you first calculate the increase in notional value of the DB side, then add on any AVC contributions).

For clarification. This is ok then as the AVCs are to a DB pension.

I'll be honest, I'm not sure now what your actual question is. I thought it was about still contributing to the AVC after drawing from the SIPP...? In which case she would be limited by the MPAA.

Ah right. I guess I was confused by the terminology as the AVC is contributions to a DB and you cannot take the AVC earlier than the DB unless you transfer it out. Thus the LGPS could be considered a DB only scheme. Wishful thinking. Hey ho

hyubh

OldBeanz said:

Ah right. I guess I was confused by the terminology as the AVC is contributions to a DB and you cannot take the AVC earlier than the DB unless you transfer it out. Thus the LGPS could be considered a DB only scheme.

Well, contributing to an (LGPS) AVC isn't contributing to a DB scheme, it's contributing to a money purchase pension linked to a DB scheme. The fact it is linked leads (for example) to the possibility of purchasing a scheme annuity with the proceeds of the AVC on retirement, and the 'putting pensions together to draw the AVC as cash' feature. However, in contributing to an AVC, the contributor isn't making additional DB contributions, since what you get on retirement is contingent on the AVC policy's investment returns. Whereas, with an APC, you are purchasing additional DB pension at the point of contributing.

OldBeanz

hyubh said:

OldBeanz said:

Ah right. I guess I was confused by the terminology as the AVC is contributions to a DB and you cannot take the AVC earlier than the DB unless you transfer it out. Thus the LGPS could be considered a DB only scheme.

Well, contributing to an (LGPS) AVC isn't contributing to a DB scheme, it's contributing to a money purchase pension linked to a DB scheme. The fact it is linked leads (for example) to the possibility of purchasing a scheme annuity with the proceeds of the AVC on retirement, and the 'putting pensions together to draw the AVC as cash' feature. However, in contributing to an AVC, the contributor isn't making additional DB contributions, since what you get on retirement is contingent on the AVC policy's investment returns. Whereas, with an APC, you are purchasing additional DB pension at the point of contributing.

So the wife could pay £4k into her AVC and the rest into an APC?

wjr4

If she takes any taxable income from the SIPP, she is limited to £4,000 pa (gross) into the AVC, and any other DC pensions. 

OldBeanz

wjr4 said:

If she takes any taxable income from the SIPP, she is limited to £4,000 pa (gross) into the AVC, and any other DC pensions. 

It is a DB pension that she would want to pay into whether by AVC (Additional Voluntary Contributions) or by APC (Additional Pension Contributions).