Are APC's worth it?

Brynsam

barnstar2077 said:

daveyjp said:

LGPS offers APCs and AVCs.

Only you can decide if APCs are preferable over AVCs,

Could you explain the difference?  I am not in this type of scheme, but I haven't heard of APCs before and would be interested in the answer.

All on the website (easy to find by googling): https://www.lgpsmember.org/arm/already-member-extra.php

AlanP_2

stephenadarglas said:

I must add the LGPS AVCs offer a very limited choice of funds in my opinion and are UK biased.

I think that depends on who your local scheme uses as the AVC provider. Mine offers Clerical Medical and Standard Life , with SL offering around 10x as many options as CM.

Still limited compared to a SIPP with thousands of options to choose from but, at least with SL, you can arrive at an Asset Allocation that reflects the UK bias you want. Thinking about the CM list you would have been able to do the same in that as well. 

AlanP_2

OP - Just be aware of the tax benefits to you of both the APC and AVC options.

The tax benefit you gain is limnited to the amount of tax you pay due to the way that the local authority pays you and account for pension contributions.

You pay £40/50 pm in tax so that is the most tax relief you can get at 20% as pension contributions are subtracted from your Gross Salary before tax is calculated.

So if £40/50 = 20% of your AVC / APC contribution then the optimal amount to contribute is £200/250 per month (£200 * 20% = £40 and £250 * 20% = £50).

If you contribute more than this then you won't get a tax benefit as there will be no taxable income left to reduce via pension contributions.

If you used a "personal pension" of some kind you could gain tax relief even though you hadn't paid any tax as that works in a different way. The pension platform you use claims 25% from HMRC of whatever amount you contribute and it is added to your pension pot. There is an upper limit of annual salary but unlikely to be an issue.

So for example you could contribute £400pm and they would reclaim £100 even though you have only paid £40/50 tax that month through your employer.

You haven't mentioned how much spare money you will have after mortgage is cleared so none of this may be relevant.

Roygroyg

Sounds like something is not right with your calculator figures you quote:
A) Did I read the Apc calculator correctly? If I pay £1200 in I get £90 back (per year)?  Because that doesn't sound great.

Ignoring inflation for simplicity at £100 per month for 10 years you would have paid in £12k and would need to live to somewhere between 150-200 years old to get it back at £90 a year. 
You said you already pay £73 per month so could this be the impact of the increase of £27 per month? Still does not sound great but has at least some potential to get that back over retirement although you would have to live a reasonably long time. Guaranteed inflation rising income is not cheap.

Another_Saver

Roygroyg said:

Sounds like something is not right with your calculator figures you quote:
A) Did I read the Apc calculator correctly? If I pay £1200 in I get £90 back (per year)?  Because that doesn't sound great.

Ignoring inflation for simplicity at £100 per month for 10 years you would have paid in £12k and would need to live to somewhere between 150-200 years old to get it back at £90 a year. 
You said you already pay £73 per month so could this be the impact of the increase of £27 per month? Still does not sound great but has at least some potential to get that back over retirement although you would have to live a reasonably long time. Guaranteed inflation rising income is not cheap.

I think the OP means the offer is to pay an extra £100/mo, £1.2k pa, in return for additional pension income of £90 pa.
That's a guaranteed, index-linked 7.5% real return for life (albeit one that's deferred to state pension age).
But as other posters have said there are other things to consider, some people like to have a DC pension "pot" alongside pension income such as the LGPS and State Pension. It's for the OP to weigh up their options.
OP, also consider contacting the LGPS, or booking a telephone appointment with the Pensions Advisory Service as they may be able to give you more individualised and specific guidance.