AVCs - quick question

Speranza239

I've just had the AVC letter from my Local Government employer. Many years back in teaching we were warned to be wary of these. I can see the advantages but - I'm almost 62, so is it likely to have a detrimental effect on pension that would outweigh the benefits? 

billywhizz1966

I organised AVC's for my wife from her LG Pension. In general, they are an excellent and very tax efficient tool as she saved all the earnings she paid 40% on by paying that amount into an AVC so free money from the Government. The biggest drawback was you can only take them out when starting to drawing your pension which is a problem for many people but looking at your age possibly that would not be an issue. Also if the value of the AVC is less than 25% of your total pension, in addition to any other lump sum you can draw it all out tax free. Not fully understanding your position you may also be able to utilise any unused allowances from the last three years so definitely worth investigating. Just to say the PRU who administer the AVC in the LGPS  are not the best at keeping their records up to date but it is a safe as houses investment and this is just something you keep your eye on if they are slow at putting payments to your records unless they have now resolved their computer system issues but this is just a minor inconvenience  

dunstonh

Many years back in teaching we were warned to be wary of these

Why were you told to be wary?    
Paying in more for your retirement provision is a good thing.

It is not uncommon for some public sector workplaces to have very bad pension information given to them (typically from militant union reps) which then in turn gets passed around with a few Chinese whispers thrown in and becomes gospel despite being very inaccurate.

 I can see the advantages but - I'm almost 62, so is it likely to have a detrimental effect on pension that would outweigh the benefits? 

Only if you expect to breach the lifetime allowance.

BillyHorner

Speranza239 said:

I've just had the AVC letter from my Local Government employer. Many years back in teaching we were warned to be wary of these. I can see the advantages but - I'm almost 62, so is it likely to have a detrimental effect on pension that would outweigh the benefits? 

If you take your AVCs at the same time as your main LGPS benefits then you can generally receive the AVCs as 100% tax free cash (within certain limits). The providers usually offer a range of funds, including lower risk ones for those close to retirement.

If you’re a basic rate taxpayer it would cost you £80 to put £100 in and, if a higher rate taxpayer, it would cost £60 to put £100 in. If your employer offers salary sacrifice then it becomes even more attractive, as you would avoid NI on your contributions as well as income tax.

What’s not to like?

AlanP_2

The Pru only administer AVCs for some local LGPS schemes not all.