Some people have no idea how lucky they are LGPS

Silvertabby

Although most people who pay LGPS AVCs do so with the intention of maximising their tax free cash, it is also possible to use some or all of your AVC savings to buy additional  LGPS pension benefits at very favourable rates.

You don't have to declare your intentions when you first take out an AVC policy - it's something you decide when you eventually retire.  You never know, your requirements may change by then.

SarahB16

Silvertabby said:

Although most people who pay LGPS AVCs do so with the intention of maximising their tax free cash, it is also possible to use some or all of your AVC savings to buy additional  LGPS pension benefits at very favourable rates.

You don't have to declare your intentions when you first take out an AVC policy - it's something you decide when you eventually retire.  You never know, your requirements may change by then.

Thank you for your helpful reply.  I was under the impression that buying additional LGPS pension benefits was at a more favourable rate via the additional pension contributions (especially so if bought quite a few years ahead of retirement) in comparison to AVCs.  If I used my AVC savings to buy additional LGPS pension benefits then surely the rate I am buying them at is inferior due to it being so near/at my actual retirement age?

I do agree with your comment though that AVCs do provide me with that flexibility but if, for example, and just for the sake of this scenario I was certain I would prefer a higher pension (noting of course I would be paying the basic rate of income tax on this additional pension income) it is then difficult to know which is financially better due to the amount that is lost to income tax whereas the lump sum from the AVCs would be tax free?   

Please correct me if my thinking is wrong here.  I don't know if anybody has modelled the comparison assuming the basic rate of income tax is deducted from the annual pension in comparison to taking the tax free lump-sum?   

Silvertabby

You are right in saying that the AVC pension purchase factors are age related, but they have always been very favourable - at whatever age - when compared with an open market annuity.

There are too many variables to make an accurate comparison some years before retirement.  Just a point, but are you aware that even if you bought a specific amount of pension through an APC contract, and retired/took your benefits before SPA, then your APC benefits would be reduced for early payment?

Are you able to hedge your bets by paying both?

MX5huggy

@SarahB16 check to see if your employer offers AVC’s via Salary Sacrifice. If they don’t ask your finance director why not. 

SarahB16

Silvertabby said:

You are right in saying that the AVC pension purchase factors are age related, but they have always been very favourable - at whatever age - when compared with an open market annuity.

There are too many variables to make an accurate comparison some years before retirement.  Just a point, but are you aware that even if you bought a specific amount of pension through an APC contract, and retired/took your benefits before SPA, then your APC benefits would be reduced for early payment?

Are you able to hedge your bets by paying both?

Just a point, but are you aware that even if you bought a specific amount of pension through an APC contract, and retired/took your benefits before SPA, then your APC benefits would be reduced for early payment?

I hadn't really considered that but that's a really good point and definitely something that I need to bear in mind, thank you as I do hope to retire before the SPA.  

Are you able to hedge your bets by paying both?

Yes, I believe I am able to do both.

Thank you very much @Silvertabby that's all really helpful.  

SarahB16

MX5huggy said:

@SarahB16 check to see if your employer offers AVC’s via Salary Sacrifice. If they don’t ask your finance director why not. 

Yes, they definitely do offer this via Salary Sacrifice.  

marycanary

I'm a manager in local government responsible for just over 200 members of staff. Of these 2 have opted out of the pension scheme, so about 1%. Of these, one is a Jehovah's Witness and another told me her parents are millionaires so she expects to inherit a substantial amount.

Not a representative sample but it does give some information on the reasons people opt out of an excellent person scheme.

OldBeanz

SarahB16 said:

Silvertabby said:

You are right in saying that the AVC pension purchase factors are age related, but they have always been very favourable - at whatever age - when compared with an open market annuity.

There are too many variables to make an accurate comparison some years before retirement.  Just a point, but are you aware that even if you bought a specific amount of pension through an APC contract, and retired/took your benefits before SPA, then your APC benefits would be reduced for early payment?

Are you able to hedge your bets by paying both?

Just a point, but are you aware that even if you bought a specific amount of pension through an APC contract, and retired/took your benefits before SPA, then your APC benefits would be reduced for early payment?

I hadn't really considered that but that's a really good point and definitely something that I need to bear in mind, thank you as I do hope to retire before the SPA.  

Are you able to hedge your bets by paying both?

Yes, I believe I am able to do both.

Thank you very much @Silvertabby that's all really helpful.  

I would have thought that buying into an APC now would lock in the approximate 10%ish uplift coming in April.

sammyjammy

billy2shots said:

In my uneducated opinion, all public sector Pension schemes are good (not that many employed in that area fully appreciate it) but the LGPS seems particularly good. 

I'm not sure thats fair.  Its not that they don't appreciate it, its that they don't understand it, I am a CS and work with many people young and old that not only don't understand it but have no interest in any changes that are made etc unless it hits them in the pocket.  I've tried to educate a few over the years but don't bother anymore unless someone shows interest.  Most don't even look at their annual pension statement.

Worst example is a Pakistani woman, she is single but lives with her extended family, she is in her mid 40s and been a CS for over 25 years nad never joined the pension, no matter what I say to her the answer is always "I don't need a pension, my family will look after me"  Crazy.

german_keeper

 Its not that they don't appreciate it, its that they don't understand it

This was also my experience during nearly 40 years as a civil servant. People I knew definitely understood that it was a "gold plated" pension, they just didn't understand why. My particular favourite was a good friend who thought that with the introduction of the Alpha scheme he would have to work till he was 67. Mind you after I pointed him in the right direction he did his homework, and I am pleased to say I went to his retirement do a few weeks ago not long after his 58th birthday.

One of the things I used to say to people when they asked is have you got a plan. When they asked what I meant I talked about state pension forecasts; approaching it as a joint venture particularly regards utilising 2 x PTA; actuarial reduction; lump sum commutation and reverse commutation, that kind of thing. Most just glazed over and said that's all far too complicated for me, and returned to filling in their latest promotion application!  

One thing I do suspect, and I hope I am wrong, is that in future there will be civil servants who work till they are 67/68, retire and then find that they have more money than they can spend, and realise that they could have retired years earlier.