Teachers AVC with Prudential

traceyaj

OldBeanz said:

traceyaj said:

On the subject of AVC's. Asking for my husband who took early retirement during February 2019 when he was 61 years old. He now receives his occupational pension from the Local Government Pension Scheme as his sole income. He also received £32,000 from AVCs at the time he retired. He will probably be starting work again quite soon with the same local authority for 18 hours per week. He is interested in taking out AVC's again but has already invested £2880 in a SIPP during May 2020. We believe there are restrictions on when and how much he can invest in AVC's due to his payment during February 2019. Any advice would be very welcome.  

Restricted to £4k (assuming he earns at least £4k) in a year and he has already contributed £3.6k. Best starting next FY. The Prudential should be aware of any limits and allow him to pay in £333 pcm.

Thanks for the reply. So if he was to pay in £4000 per year from April 2021 until March 2022. (8k total investment, at a cost of less than this due to tax relief) and the value of the investment stayed at £8k. would he have to pay tax on the £8k.     

OldBeanz

traceyaj said:

OldBeanz said:

traceyaj said:

On the subject of AVC's. Asking for my husband who took early retirement during February 2019 when he was 61 years old. He now receives his occupational pension from the Local Government Pension Scheme as his sole income. He also received £32,000 from AVCs at the time he retired. He will probably be starting work again quite soon with the same local authority for 18 hours per week. He is interested in taking out AVC's again but has already invested £2880 in a SIPP during May 2020. We believe there are restrictions on when and how much he can invest in AVC's due to his payment during February 2019. Any advice would be very welcome.  

Restricted to £4k (assuming he earns at least £4k) in a year and he has already contributed £3.6k. Best starting next FY. The Prudential should be aware of any limits and allow him to pay in £333 pcm.

Thanks for the reply. So if he was to pay in £4000 per year from April 2021 until March 2022. (8k total investment, at a cost of less than this due to tax relief) and the value of the investment stayed at £8k. would he have to pay tax on the £8k.     

He can only pay in £4k per financial year - not sure whether you mean 2023 or per calendar year to get £8k. 
He would pay in £4000 but if he had taken that through his wages it would be taxed at 20% (Assuming he does not live in Scotland or has strayed into higher rate tax etc). So in reality it would cost him £3,200 from his pay packet. No tax on withdrawal if taken with his 2nd LGPS pension so a profit of £800 pa plus tax free growth.

traceyaj

Thank you, we really appreciate your help OldBeanz. I did mean up until 2023 not 2022  as I mistakenly typed. All being well he will plan the above scenario with the Prudential. 

AlanP_2

OldBeanz said:

traceyaj said:

On the subject of AVC's. Asking for my husband who took early retirement during February 2019 when he was 61 years old. He now receives his occupational pension from the Local Government Pension Scheme as his sole income. He also received £32,000 from AVCs at the time he retired. He will probably be starting work again quite soon with the same local authority for 18 hours per week. He is interested in taking out AVC's again but has already invested £2880 in a SIPP during May 2020. We believe there are restrictions on when and how much he can invest in AVC's due to his payment during February 2019. Any advice would be very welcome.  

Restricted to £4k (assuming he earns at least £4k) in a year and he has already contributed £3.6k. Best starting next FY. The Prudential should be aware of any limits and allow him to pay in £333 pcm.

I'm not sure they would be limited to £4k a year asuming you mean the Money Purchase Annual Allowance limit?

By retiring from the LGPS and taking his AVC as the TFLS he won't have triggered the MPAA as it doesn't apply to DB scheme benefits.

OldBeanz

AlanP_2 said:

OldBeanz said:

traceyaj said:

On the subject of AVC's. Asking for my husband who took early retirement during February 2019 when he was 61 years old. He now receives his occupational pension from the Local Government Pension Scheme as his sole income. He also received £32,000 from AVCs at the time he retired. He will probably be starting work again quite soon with the same local authority for 18 hours per week. He is interested in taking out AVC's again but has already invested £2880 in a SIPP during May 2020. We believe there are restrictions on when and how much he can invest in AVC's due to his payment during February 2019. Any advice would be very welcome.  

Restricted to £4k (assuming he earns at least £4k) in a year and he has already contributed £3.6k. Best starting next FY. The Prudential should be aware of any limits and allow him to pay in £333 pcm.

I'm not sure they would be limited to £4k a year asuming you mean the Money Purchase Annual Allowance limit?

By retiring from the LGPS and taking his AVC as the TFLS he won't have triggered the MPAA as it doesn't apply to DB scheme benefits.

There have been debates over that issue in the last few weeks (looked at the other way, with level of contributions allowed if a MPAA had been triggered).  The conclusion looked at from that point of view was that contributions to the AVC was restricted even if it was to be used with the LGPS DB while buying extra DB pension from the LGPS was not restricted.
Mr @TraceyAJwould have been told if his MPAA had been triggered and the Prudential asks if the MPAA has been triggered when opening the AVC.

badmemory

Surely which route you take depends on what you hope to achieve.  An increased pension at retirement age is one thing & a way of providing income to retire several years early is another.

Checkdd

TartanTweed said:

Hi, I am considering making AVCs of around 5% of my monthly salary (£220 approximately) with Prudential.
I also have my Teachers Pension. I have just turned 30 will reach normal pension age for the AVC in 2058.
Can someone please explain the pros and cons to making such contributions? Is it worth it? What kind of return can I expect?
Any advice welcome.

Hi. I hope you went down the added years route! I took out Teacher AVCs with Pru in the 90's with advice that they were the better option. Not true! Added years would have been much better. I also actually get about four times the growth that Pru achieve from another pension provider that was set up with a company I worked for outside of teaching. 

Does anyone know if there is a way to make a claim against Pru for this?

bucksman

Checkdd said:

TartanTweed said:

Hi, I am considering making AVCs of around 5% of my monthly salary (£220 approximately) with Prudential.
I also have my Teachers Pension. I have just turned 30 will reach normal pension age for the AVC in 2058.
Can someone please explain the pros and cons to making such contributions? Is it worth it? What kind of return can I expect?
Any advice welcome.

Hi. I hope you went down the added years route! I took out Teacher AVCs with Pru in the 90's with advice that they were the better option. Not true! Added years would have been much better. I also actually get about four times the growth that Pru achieve from another pension provider that was set up with a company I worked for outside of teaching. 

Does anyone know if there is a way to make a claim against Pru for this?

I have tried to explore this and have gotten nowhere. Like you, I was 'sold' the Pru AVC in the 90s; indeed, it still sits with them, and I am now looking at a drawdown solution now that I have semi-retired. Who did you move your AVC to?