In LGPS, should I go for an AVC or APC?

suezd

I am 49 and hoping to retire earlier than 67 and confused by how best to achieve this. I’m fortunate to be in the LGPS. Would buying back years with an APC be the best option? 

Silvertabby

suezd said:

I am 49 and hoping to retire earlier than 67 and confused by how best to achieve this. I’m fortunate to be in the LGPS. Would buying back years with an APC be the best option? 

Rule of thumb is that APCs are good value if you intend to carry on (or at least leave your benefits deferred) to your NRA, because of the early retirement reductions.  AVCs are usually taken out in order to maximise the tax free cash option - but they can be used to purchase added pension at (at least currently!) very favourable rates.

It really depends on when you want to retire.

jamjar92

Both could be used to purchase more pension. Paying an APC is fixed amount that must be paid for duration. An AVC is more flexible, as you stop/ start and vary the amount. One thing to note is an APC does not increase the spouses pension amount only yours. Another member maybe able to comment if the same amount of money in either an APC or AVC buys the same amount of extra pension.

Silvertabby

jamjar92 said:

Both could be used to purchase more pension. Paying an APC is fixed amount that must be paid for duration. An AVC is more flexible, as you stop/ start and vary the amount. One thing to note is an APC does not increase the spouses pension amount only yours. Another member maybe able to comment if the same amount of money in either an APC or AVC buys the same amount of extra pension.

Pension bought with an AVC comes with the option of spouse's benefit or not.  If 'not' then the pension bought is sllghtly higher than 'with' - but it's not a huge difference.

APCs and pension bought with AVCs are two totally different calculations so, no, the same amount of money won't automatically buy the same amount of pension.

ElephantBoy57

Silvertabby said:

 AVCs are usually taken out in order to maximise the tax free cash option - but they can be used to purchase added pension at (at least currently!) very favourable rates.

It really depends on when you want to retire.

I am 59 and I can afford to buy some AVC, is there a defined amount that £1,000 would increase by?

dunstonh

And dont forget the other options available.  SIPP/PPP/SHP.  They may be better suited for some objectives.

jamjar92

ElephantBoy57 said:

Silvertabby said:

 AVCs are usually taken out in order to maximise the tax free cash option - but they can be used to purchase added pension at (at least currently!) very favourable rates.

It really depends on when you want to retire.

I am 59 and I can afford to buy some AVC, is there a defined amount that £1,000 would increase by?

I never found one on the LGPS site maybe looking the wrong place. 🙁

suezd

dunstonh said:

And dont forget the other options available.  SIPP/PPP/SHP.  They may be better suited for some objectives.

Thanks v much dunstonh. My main objective is to reduce my retirement age as much as I can manage. What do SIP/PPP/SHP involve please? 

Silvertabby

jamjar92 said:

ElephantBoy57 said:

Silvertabby said:

 AVCs are usually taken out in order to maximise the tax free cash option - but they can be used to purchase added pension at (at least currently!) very favourable rates.

It really depends on when you want to retire.

I am 59 and I can afford to buy some AVC, is there a defined amount that £1,000 would increase by?

I never found one on the LGPS site maybe looking the wrong place. 🙁

It's something that can only be run by an administrator.  It's probably more difficult now, for obvious reasons, but your LGPS should be able to run a full retirement quote, including AVC options, once you are within 6 or 12 months of retirement.

If they are like the LGPS I worked for they won't use just any figures - it will be the value of your AVC fund as at the date of the estimate.

DiggerUK

Buying ' added' years is a benefit long since disappeared, sad but true.
Instead of gambling your retirement savings with equities in pensions through APC's, AVC's etc.,  might I suggest you put gold ETF's or ETC's in a tax wrapped SIPP or ISA. 

Failing that you could simply buy UK legal tender gold coins. No VAT, no CGT, no Income Tax..._

dunstonh

suezd said:

dunstonh said:

And dont forget the other options available.  SIPP/PPP/SHP.  They may be better suited for some objectives.

Thanks v much dunstonh. My main objective is to reduce my retirement age as much as I can manage. What do SIP/PPP/SHP involve please? 

If you choose to retire earlier than scheme pension age you take on a reduction.    utilising personal pensions (type isn't important at this point) can be used to fund the gap between earlier retirement and scheme retirement age allowing you to reduce/avoid the pension reduction.