AVC into LGPS

Redsox64

Not wishing to hijack another recent post I have a related question. I understand that one can take an avc as tax free cash at the the same time as main LGPS, but also there is the option to add to your LGPS pension. How in principle does this work an what are the conversion factors? Is it similar to buying an annuity? Sorry for my very limited understanding, I’m trying to educate myself in such matters!

OldBeanz

Redsox64 said:

Not wishing to hijack another recent post I have a related question. I understand that one can take an avc as tax free cash at the the same time as main LGPS, but also there is the option to add to your LGPS pension. How in principle does this work an what are the conversion factors? Is it similar to buying an annuity? Sorry for my very limited understanding, I’m trying to educate myself in such matters!

There are more informed contributors than me but, when I asked a few years ago, the calculations were along the lines of "too complex to explain here". Probably suffice to say you will be doing well if you max your tax free cash and the extra pension will be better value than that commercially available. It automatically includes dependents.

Silvertabby

The factors are age related, so not possible to give you any meaningful figures.

However, I can say that the (current) LGPS/AVC  annuity factors are very generous in relation to what the open market would offer.

collins74

It may be worth a call to your pension fund to discuss when you plan to retire - they may be able to give you idea of the extra income you would be entitled if you use all or part of your AVC in this way.  

Although my main objective is to get the maximum TFLS from my AVC, I rang my scheme to enquire about how buying extra income works and they gave me some factors for potential ages for when I want to retire.  

On my projections I will likely max out the lump sum, and have around £10k left over which I will use for extra LGPS with survivor benefits if possible.

crambemaritima

I've just been given figures as I'm retiring soon.

I have £52, 121 of AVCs in excess of those which can be released tax free. These can be  exchanged for additional scheme pension in LGPS of £2,455 pa.

I did an open market comparison for an annuity on similar terms (I'm female, 60, good health; pension to pay out for at least five years, index linked with 50% survivor benefits). The additional LGPS pension is about double the best open market offer.

Obviously your figures will be different, and the factors do get updated from time to time.

 

Wentthedaywell?

Silvertabby said:

The factors are age related, so not possible to give you any meaningful figures.

However, I can say that the (current) LGPS/AVC  annuity factors are very generous in relation to what the open market would offer.

Hi Silver Tabby, I think I may have been the poster the OP referred to. The calculator says I would get £100 pension per £1760 given up. Is this considered a good ratio?

(OP have you looked on the the LGPS to calculate what you'd get in your own situation?)

Redsox64

Thanks for the replies. Seems a call to the pension section is in order. Another quick question …..I will benefit from an automatic lump sum which I believe will 25% tax free, would the tax free avc be in addition to this?

Silvertabby

Redsox64 said:

Thanks for the replies. Seems a call to the pension section is in order. Another quick question …..I will benefit from an automatic lump sum which I believe will 25% tax free, would the tax free avc be in addition to this?

Your automatic lump sum (from your pre 2008 service) is all tax free.  Your AVC may also be taken as tax free cash, as long as it is within HMRC limits.

ie, maximum tax free cash is 25% of 20 X annual pension (after any reductions for early payment) plus 1 X automatic lump sum plus 1 X AVC fund.

Redsox64

Thanks @Silvertabby that’s good news. Im thinking of taking early retirement at 60 (currently 57)).  I’m aware of early reduction penalties on my post 2008 pension. I’m thinking I could put the lump sum into my SIPP if I take early retirement   Is there any bar to doing so? Thanks

saucer

All you need to know here https://www.lgpsmember.org/more/AVCoptions.php

saucer

Redsox64 said:

Thanks @Silvertabby that’s good news. Im thinking of taking early retirement at 60 (currently 57)).  I’m aware of early reduction penalties on my post 2008 pension. I’m thinking I could put the lump sum into my SIPP if I take early retirement   Is there any bar to doing so? Thanks

I suspect this will be your problem https://www.pensionbee.com/pensions-explained/pension-withdrawal/money-purchase-annual-allowance