Transfer of SIPP to Pru AVC for LGPS

taktikback

Hi - Long time lurker!

My wife is potentially retiring and claiming her LGPS in 9-12 months time.(Will be taking "early" at 60) There is an automatic lump sum of £7k from pre-2008 service

She's also been paying Pru AVCs for a number of years with a view to taking these as a tax free lump sum at the same time as claiming the pension.

That's currently at about £30k

The pension (reduced for taking early) works out at about £10k per year, so by my reckoning the value for calculating what can be taken from the AVC as tax free money is 20x10+30+7 = £237k of which 25% (£59,250) could be taken tax free

We've been looking at ways to top the AVC up as much as possible whilst staying within the various constraints (Annual Allowance limits etc) to get to the £59,250

She also has a HL SIPP worth about £70K.

The Pru AVC rules say that they accept transfers in.

Would it be possible to transfer in the full £70k which would allow her to get to the £59250, and also buy additional pension with whatever remains?

Or am I just trying to be way too clever, and the rules don't allow any of that?

Many thanks!

OldBeanz

As far as I understand the Pru do not let you transfer funds into their LGPS AVC's - not sure whether this is an LGPS or Pru constraint. 
For tax breaks, she should invest as much taxable income between now and retiring. Can she transfer her marriage allowance to you to gain extra taxable income? Would bring in another £250+.
The Pru's website FAQ's is down for its monthly irregular maintenance which is ongoing since its last 'improvement' from 2020. 

taktikback

Many thanks for the reply!

Yes - we're trying to get all we can in there between now and retiring.

We're both earning above our personal allowance limits at the moment, so I don't think the marriage allowance move would be in play for us.

I checked the Pru key features document and it does say that the AVC account allows transfers in, but it doesn't go into specifics. Maybe we should call them to clarify.

I guess if this was a genuine loophole, everyone would be doing it because it's a no brainer!

Maybe when they talk about lump sum payments in being possible, they mean - only from earned income in the current job at the time

OldBeanz

taktikback said:

Many thanks for the reply!

Yes - we're trying to get all we can in there between now and retiring.

We're both earning above our personal allowance limits at the moment, so I don't think the marriage allowance move would be in play for us.

I checked the Pru key features document and it does say that the AVC account allows transfers in, but it doesn't go into specifics. Maybe we should call them to clarify.

I guess if this was a genuine loophole, everyone would be doing it because it's a no brainer!

Maybe when they talk about lump sum payments in being possible, they mean - only from earned income in the current job at the time

As one of many folk disappointed by the Pru (there is a long long thread)- they haven't offered to make good the pension payments that my wife could have made by them transferring money into the pension. As you say everyone would be transferring pensions - although I struggle to find the no transfers-in in writing - just the LGPS stating how you can make payments i.e. through salary. I would think that transfer-ins would refer to when you were moving authority. But if you can prove otherwise...
Yes lump sums payments are from salary. APC lump sum payments are allowed by cheque.
As stated you can utilise the marriage allowance assuming you aren't paying HRT.
To make the maximum payments you want to maximise the amount of tax your wife would be due and pay that into her AVC. So if your wife earns £30k pa then she will pay 6.5% (£1850) into her LGPS - she then gives you the marriage allowance of £1260 and assuming her starting tax code of 1257L then her code comes down to 1131L so her taxable income will be £pay - £LGPS - £tax allowance. As stated, the logic is you want her to pay more tax but that allows you to benefit from lower tax and her to pay more taxable income into pension. So (£30000 - (£1850 + £11310)) = £16840 contribution against your present (£30000 - (£1850 + £12570)) = £15580.

OldBeanz

Forgot. HL allow you to take a small pot of £10k so she could draw that toward the end of the tax year and reclaim the tax on £7.5k by investing an extra £7.5k in the AVC throughout the year.

taktikback

Thanks for the information - I get the allowance transfer argument now! I'll look into the small pot idea