LGPS Help & Suggestions

LoopySnooker

Many thanks to everyone for the helpful comments.  I think I'm a lot clearer now.  My tax code is 1383 as I get Marriage Allowance so I will actually be paying very little tax.

My confusion seems to have been addressed as I thought that the most I could put into a SIPP and get Tax Relief on would only be around £10k gross (£15k taxable pay - approx £5k PIA) however based on the above comments it seems I can actually put in around £15k gross (my total taxable pay) and not worry about the PIA.

That's pretty much made up my mind to boost my SIPP rather than LGPS as I'll be getting about £3k in Tax Relief.  It also allows me to diversify and I won't need to be so risk averse with a reasonable LGPS 'in the bank'.

Thanks again to everyone.

OldBeanz

LoopySnooker said:

Many thanks to everyone for the helpful comments.  I think I'm a lot clearer now.  My tax code is 1383 as I get Marriage Allowance so I will actually be paying very little tax.

My confusion seems to have been addressed as I thought that the most I could put into a SIPP and get Tax Relief on would only be around £10k gross (£15k taxable pay - approx £5k PIA) however based on the above comments it seems I can actually put in around £15k gross (my total taxable pay) and not worry about the PIA.

That's pretty much made up my mind to boost my SIPP rather than LGPS as I'll be getting about £3k in Tax Relief.  It also allows me to diversify and I won't need to be so risk averse with a reasonable LGPS 'in the bank'.

Thanks again to everyone.

You might want to consider paying up to your tax allowance in each year then paying the £1k into an LGPS AVC which would become your pension commencement lump sum. It then means you won't invest too much each year and easier to understand if maintaining this over a number of years.

LoopySnooker

OldBeanz said:

You might want to consider paying up to your tax allowance in each year then paying the £1k into an LGPS AVC which would become your pension commencement lump sum. It then means you won't invest too much each year and easier to understand if maintaining this over a number of years.

Thanks and that does sound like a reasonable idea.  I've actually been reconsidering and may choose to boost my LGPS with £15k for the simple reason that I may not have that as an option going forward whereas I'm always likely to be able to top up my SIPP.

If I pay £12k into my SIPP I'll obviously end up with £15k to invest after Tax Relief but paying £12k into LGPS gives me roughly £1100/yr extra pension (or £1400/yr if I add £15k).

I realise the SIPP has its own advantages due to flexibility but with LGPS I'll effectively get a >9% index linked annuity so wouldn't it be better to take advantage whilst I can ?

MX5huggy

I’m not clear are you still considering a transfer in or APC? 

If transfer in then yes you’re running out of time and you won’t have the opportunity again, I would be looking to put in as much as possible. You can build up your SIPP again but never get the chance of the index linked pension for life again at this cost. 

LoopySnooker

MX5huggy said:

I’m not clear are you still considering a transfer in or APC? 

If transfer in then yes you’re running out of time and you won’t have the opportunity again, I would be looking to put in as much as possible. You can build up your SIPP again but never get the chance of the index linked pension for life again at this cost. 

Thanks and sorry for the confusion.  I have already transferred in so that is now sorted, although it did seem to take forever for anyone reading this and considering leaving it late to transfer in.  

My point is that although I have no plans to leave my job, I appreciate with employment things can and do change and sometimes happen quickly.  As you say, I may never have the chance again to build up such a good pension for relatively low cost, which is why I'd now like to max out my APC contributions for this tax year.

One other query, on the LGPS website it states 'The maximum amount of additional pension you can buy is £7316'.  I understand this is £7316/yr of extra pension but are my APC contributions still limited by my annual earnings (£15k) or could I pay in say £30k and get myself an extra £2800/yr ?  

Silvertabby

LoopySnooker said:

MX5huggy said:

I’m not clear are you still considering a transfer in or APC? 

If transfer in then yes you’re running out of time and you won’t have the opportunity again, I would be looking to put in as much as possible. You can build up your SIPP again but never get the chance of the index linked pension for life again at this cost. 

Thanks and sorry for the confusion.  I have already transferred in so that is now sorted, although it did seem to take forever for anyone reading this and considering leaving it late to transfer in.  

My point is that although I have no plans to leave my job, I appreciate with employment things can and do change and sometimes happen quickly.  As you say, I may never have the chance again to build up such a good pension for relatively low cost, which is why I'd now like to max out my APC contributions for this tax year.

One other query, on the LGPS website it states 'The maximum amount of additional pension you can buy is £7316'.  I understand this is £7316/yr of extra pension but are my APC contributions still limited by my annual earnings (£15k) or could I pay in say £30k and get myself an extra £2800/yr ?  

Contribution limits

At the present time there is no overall limit on the amount of pension contributions you can pay (although the amount of additional LGPS pension you can buy is limited to £7,316). However, tax relief is only given on:

• contributions up to 100% of your UK taxable earnings, or;
• up to £3,600 if your earnings are below £3,600

As I've said before, APCs are good value if you intend to work until  (or not take your pension before) SPA, or very close to it.  Not so good if you want to take them from age 55, due to the early payment reductions.  

Lemon_dr1zzle

Do you have any dependents? Or over 55. If you pass away the APC dies with you and does not provide any further benefits. If you are made redundant over 55 your APC will be reduced unlike your standard benefits 

LoopySnooker

Silvertabby said:

Contribution limits

At the present time there is no overall limit on the amount of pension contributions you can pay (although the amount of additional LGPS pension you can buy is limited to £7,316). However, tax relief is only given on:

• contributions up to 100% of your UK taxable earnings, or; 
• up to £3,600 if your earnings are below £3,600 

As I've said before, APCs are good value if you intend to work until  (or not take your pension before) SPA, or very close to it.  Not so good if you want to take them from age 55, due to the early payment reductions.   

Lemon_dr1zzle said:

Do you have any dependents? Or over 55. If you pass away the APC dies with you and does not provide any further benefits. If you are made redundant over 55 your APC will be reduced unlike your standard benefits 

Thanks again both.  Regarding retiring early, yes I do intend to but I've been looking at the reductions shown on https://www.lgpsmember.org/more/reductions.php and will factor them in.  Even if I take everything 10 years before SPA, then my APCs would still equate to almost 6% index linked annuity (assuming my calculations are correct ! - 37.7% reduction).

The main downside is if I happen to pass away as the APCs are gone and won't provide any additional benefit for a spouse.  However, my wife is reasonably well covered with her own DB pension and also full SP entitlement in the bag.

I'll also still have enough time to rebuild my SIPP over the next 10-12 years which should help me delay taking the LGPS quite as early.