Retirement Saving

Notjustamum_2

Reg_Smeeton said:

Notjustamum_2 said:

 before returning to work term time only. My current pension scheme is pretty good percentage contribution wise, employer contribution is 20%, employee is 5.5% but I earn below the tax threshold so the ACTUAL amount is not high. 

Do you work in a school / local government? Those contribution rates look like they are for the LGPS....

Yes it is the LGPS 

Silvertabby

Notjustamum_2 said:

Reg_Smeeton said:

Notjustamum_2 said:

 before returning to work term time only. My current pension scheme is pretty good percentage contribution wise, employer contribution is 20%, employee is 5.5% but I earn below the tax threshold so the ACTUAL amount is not high. 

Do you work in a school / local government? Those contribution rates look like they are for the LGPS....

Yes it is the LGPS 

Reg beat me to it with this very question!

Any chance that you will be able to increase your hours in future?  That would make AVCs more of an attractive option - tax free in, tax free cash (within HMRC limits) out or, alternatively, using the AVC fund to buy additional index linked LGPS benefits.

Notjustamum_2

Due to budget cuts my hours were actually reduced last year.  I can’t see them being increased anytime soon and I’m at the very top of my pay grade.  I am at the highest admin grade available in my school (part of a MAT so no top level admin staff in the individual schools). 

Dazed_and_C0nfused

If you want the benefit of tax relief then your only option is relief at source.

But you need to weigh up if that option (investment in funds being the usual option within the pension wrapper) will be as good value as paying more to accrue additional guaranteed benefits within LGPS without the benefit of any tax relief.

Retireinten

With the LGPS it isn't so much the %'s you and your employer pays in but how much you have accrued in the scheme. It is an excellent scheme - one I have had the good fortune to be a member of for around 25 years now - so it is worth digging out your pension statement (you should get one annually) and have a look at the pension you have accrued so far... and what youcould accrue to your pension age if you continue to work. 


I think how you save depends on when you want to retire.  You can access your LGPS before state pension age but it will be subject to acturial reduction, so you may want to consider a private pension to fund early retirement years to avoid a big reduction in your LGPS. 


But AVC's have an advantage in the LGPS as they can be used as your tax free lump sum when you take your LGPS pension (there is a calculation the LGPS uses to work out 25% of your pension 'pot'). So you get tax relief in but no tax to pay on the lump sum when you take it out. 

kuratowski

Retireinten said:

I think how you save depends on when you want to retire.  You can access your LGPS before state pension age but it will be subject to acturial reduction, so you may want to consider a private pension to fund early retirement years to avoid a big reduction in your LGPS.

This is a key observation.  For early retirement, a personal pension might well be more suitable (and would get tax relief despite you not paying any tax).  But as above, if you're going to work to NPA and want to get the maximum tax free lump sum, AVCs might work out better.  You have to decide what objective is the most important to you.
Ideally, you would also plan as a couple, factoring in your partner's pension provision(s) as well.
As a separate matter, you can review the investment of your existing equitable life pension, and possibly transfer it to a personal pension if it's currently in a low growth/high cost product.
And finally, how on earth did we get to page 2 of a pensions board thread without someone already saying: Have You Checked Your State Pension Forecast?
https://www.gov.uk/check-state-pension

Notjustamum_2

Thanks.  I have checked my state pension forecast. It says I am fully funded with no incomplete years. My SAHM years were protected by claiming child benefit. 

I’m not actually planning on staying in the LGPS until retirement age as we may move and then I’d probably do something that didn’t restrict me to taking holidays in the most expensive times. Looks like a personal pension plan may be the way to go.  

Thanks to you all.  

Clueless56

Hi,
Your ex-ELAS pension is a personal pension now isn't it?  It's worth checking with them if you can pay into it as the costs are low and you can select your own funds including multi-asset funds.  They're very helpful, having TUPE'd over the ELAS staff.

Clueless56

Hi again,
Having thought about your situation a bit more while I was weeding   - you mentioned that your ex-ELAS pension is now c£20k.  When the ELAS drama happened I was about 40 (now 60) and my deferred fund went down to £34k, which was painful as my circumstances had changed since I'd paid into it and what I'd thought had been future security suddenly wasn't.  As you know, ELAS took a very cautious approach over the years then put the transfer recommendation to us all, it was voted in and now Utmost manages the pensions.  My £34k fund from 20 years ago is now £114k and I hope will continue to grow at a higher rate now I have raised the investment risk.  If you consider that you are 18 years younger than me and intend to add to your pension pot, in 18-20 years' time, it should be a decent size.

Like you, I'm now an active member of the LGPS and feel very fortunate - a DB to provide guaranteed income plus a DC that I can draw down from and which my children can inherit if I don't spend it all.  I have had changing fortunes over my life and periods of very low/no earnings and I feared eat or heat dilemmas in retirement.  That is no longer the case.  Time is your friend with investments and your £20k pot that feels meagre now should end up a security for you when you get to my age or retirement.

jamesd

It's also worth considering that your personal contributions are only limited by your gross pay (annual allowance too high to matter for you) so you could move savings into additional pension contributions and that's probably a good move. Once you reach 55 you could take 25% of a personal pension as a tax free lump sum with no adverse consequences and leave the rest invested in a flexi-access drawdown account for later. If you were to withdraw anything from the flexi-access drawdown account, or used UFPLS for a lump sum, you'd trigger the 4k a year cap on personal pension contributions (defined benefit average or final salary still get to use the rest of the 40k annual allowance)

You can even take a maximum of £7,500 in tax free lump sum every rolling twelve months (not calendar or tax year) and recycle that into more pension contributions for a second bite at the tax relief.

If it's a choice between your or your husband making pension contributions we'd need to know a fair bit more about his circumstances. If he's a higher rate tax payer and able to use salary sacrifice for personal pension contributions that pretty much decides it as him best unless the pension lifetime allowance is a factor.