Some people have no idea how lucky they are LGPS

Nurse2047

I know with the nhs AVC system you only get to choose from a selection of funds however best to contact them to see what they offer. 

OldBeanz

Silvertabby said:

OldBeanz said:

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.

Yes, but only the amount that has actually been bought, not the amount contracted to be bought over X months.  

That is not so good. The TPS, as I understand it, works with the amount contracted.

OldBeanz

SarahB16 said:

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.

@Silvertabby    Thank you so much for your wonderful advice.  I do like to read the various threads on here and I remember a little while back reading that AVCs seemed to be less popular these days.  Are my circumstances different (due to being in the LGPS) in that the LGPS lets you take the AVC as a 100% tax free lump sum and my DB pension is left untouched to be used just for an annual pension? 

The pension contributions I make via salary sacrifice to the LGPS takes me from being a higher rate tax payer to being a basic rate tax payer.  This year I was unwell and had to take quite a bit of sick leave from work which will mean my salary this year will all be taxed at 20%.  From 6th April next year after my salary sacrifice pension deductions I think will be into the 40% tax band hence why I am thinking of making AVCs and think it would be sensible to reduce my gross earnings to ensure I am not taxed at 40%. 

This isn't a question but more confirmation that what I am planning on doing makes sense and is the right thing to do as I am not by any means an expert when it comes to AVCs.

I did enquire as to who the AVC pension provider is and it is Aegon.  I presume dependent on my risk appetite I can select the funds I wish my money to be invested in?  Does anybody know if Aegon publish which funds can be selected to be invested in from the AVCs and can I literally pick whichever ones I wish?   

Thank you in advance for any help with my query. 

Your understanding is correct.
It would be highly unusual if Aegon did not offer different risk options.
You do not state how long you have to retirement but the amount of cash you can invest in an AVC and draw as cash is significant and even at 19% tax relief is worth considering for many.

SarahB16

OldBeanz said:

SarahB16 said:

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.

@Silvertabby    Thank you so much for your wonderful advice.  I do like to read the various threads on here and I remember a little while back reading that AVCs seemed to be less popular these days.  Are my circumstances different (due to being in the LGPS) in that the LGPS lets you take the AVC as a 100% tax free lump sum and my DB pension is left untouched to be used just for an annual pension? 

The pension contributions I make via salary sacrifice to the LGPS takes me from being a higher rate tax payer to being a basic rate tax payer.  This year I was unwell and had to take quite a bit of sick leave from work which will mean my salary this year will all be taxed at 20%.  From 6th April next year after my salary sacrifice pension deductions I think will be into the 40% tax band hence why I am thinking of making AVCs and think it would be sensible to reduce my gross earnings to ensure I am not taxed at 40%. 

This isn't a question but more confirmation that what I am planning on doing makes sense and is the right thing to do as I am not by any means an expert when it comes to AVCs.

I did enquire as to who the AVC pension provider is and it is Aegon.  I presume dependent on my risk appetite I can select the funds I wish my money to be invested in?  Does anybody know if Aegon publish which funds can be selected to be invested in from the AVCs and can I literally pick whichever ones I wish?   

Thank you in advance for any help with my query. 

Your understanding is correct.
It would be highly unusual if Aegon did not offer different risk options.
You do not state how long you have to retirement but the amount of cash you can invest in an AVC and draw as cash is significant and even at 19% tax relief is worth considering for many.

I'm 49 years old and I'd like to think I will retire at the age of approximately 62.  (Normal state pension age for me is 67). 

I'm sure Aegon will offer different risk options but I was hoping to be able to view the various funds and wondered if anybody knew where these could be viewed.  Alternatively, I can just enquire directly with them.  

The_Unready

Sarah - I've just started doing exactly what you're proposing - buying AVCs (in my case through the council's AVC-Wise tie-up) to avoid the higher rate of tax on some of my earnings.

I actually only set it up last Friday - my council's AVC provider is Prudential, and when I logged on to look at the fund choices they were rated in terms of risk: minimal, low, medium and high. I could have split my pot and selected more than one fund (which I may do in the future), but as a starter for ten I've just selected the one low risk fund for now as I'm approaching retirement age.

Unless something changes, I intend to take the AVCs as cash alongside my pension at my normal retirement date.

OldBeanz

SarahB16 said:

OldBeanz said:

SarahB16 said:

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.

@Silvertabby    Thank you so much for your wonderful advice.  I do like to read the various threads on here and I remember a little while back reading that AVCs seemed to be less popular these days.  Are my circumstances different (due to being in the LGPS) in that the LGPS lets you take the AVC as a 100% tax free lump sum and my DB pension is left untouched to be used just for an annual pension? 

The pension contributions I make via salary sacrifice to the LGPS takes me from being a higher rate tax payer to being a basic rate tax payer.  This year I was unwell and had to take quite a bit of sick leave from work which will mean my salary this year will all be taxed at 20%.  From 6th April next year after my salary sacrifice pension deductions I think will be into the 40% tax band hence why I am thinking of making AVCs and think it would be sensible to reduce my gross earnings to ensure I am not taxed at 40%. 

This isn't a question but more confirmation that what I am planning on doing makes sense and is the right thing to do as I am not by any means an expert when it comes to AVCs.

I did enquire as to who the AVC pension provider is and it is Aegon.  I presume dependent on my risk appetite I can select the funds I wish my money to be invested in?  Does anybody know if Aegon publish which funds can be selected to be invested in from the AVCs and can I literally pick whichever ones I wish?   

Thank you in advance for any help with my query. 

Your understanding is correct.
It would be highly unusual if Aegon did not offer different risk options.
You do not state how long you have to retirement but the amount of cash you can invest in an AVC and draw as cash is significant and even at 19% tax relief is worth considering for many.

I'm 49 years old and I'd like to think I will retire at the age of approximately 62.  (Normal state pension age for me is 67). 

I'm sure Aegon will offer different risk options but I was hoping to be able to view the various funds and wondered if anybody knew where these could be viewed.  Alternatively, I can just enquire directly with them.  

Majority on here are with Prudential (there is a long thread about how appalling they are, even reporting themselves to the pension authorities) but someone may be able to help.
To work out how much you can draw tax free the most 'common way' to do this is the calculation (yearly pension*20/3 - any pre 2008 tfls) So, for simplicity, if you have a forecast pension of £3000 and £300 pre2008 lump sum the calculations are £3000pa *20 = £60000 to give you the 'value' of your pension you can then take a lump sum of a third of this which is £20,000 (so 25% of £80k total value). Thus your optimum value for the AVC would be £20k-£300 fixed lump sum giving £19,700. Overshooting allows you to buy additional pension which is value for money as well.
Depending on what you want to do with the money will decide whether you de-risk towards 60 i.e. a new car or not to de-risk if reinvesting.
The 'value' of your pension in real terms is a lot more than the calculation used.
The 'common way' was the calculation used by everyone until about 6 months ago until one poster found his authority had made a slightly different calculation which in the end did not significantly change the outcome.
It would be difficult to go too far wrong when paying tax at 19%  - at 40% ...

Albermarle

I'm sure Aegon will offer different risk options but I was hoping to be able to view the various funds and wondered if anybody knew where these could be viewed.  Alternatively, I can just enquire directly with them. 

Normally with a DC pension ( which is what your AVC pension is ) you can log on to the providers ( Aegon) website and see the investments available and how much money you have in there. Presumably you will be given logon details when you actually join. Aegon have many different pension products, so will probably be difficult to see the exact range of investments available, until you join. 

Silvertabby

SarahB16 said:

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.

@Silvertabby    Thank you so much for your wonderful advice.  I do like to read the various threads on here and I remember a little while back reading that AVCs seemed to be less popular these days.  Are my circumstances different (due to being in the LGPS) in that the LGPS lets you take the AVC as a 100% tax free lump sum and my DB pension is left untouched to be used just for an annual pension? 

The pension contributions I make via salary sacrifice to the LGPS takes me from being a higher rate tax payer to being a basic rate tax payer.  This year I was unwell and had to take quite a bit of sick leave from work which will mean my salary this year will all be taxed at 20%.  From 6th April next year after my salary sacrifice pension deductions I think will be into the 40% tax band hence why I am thinking of making AVCs and think it would be sensible to reduce my gross earnings to ensure I am not taxed at 40%. 

This isn't a question but more confirmation that what I am planning on doing makes sense and is the right thing to do as I am not by any means an expert when it comes to AVCs.

I did enquire as to who the AVC pension provider is and it is Aegon.  I presume dependent on my risk appetite I can select the funds I wish my money to be invested in?  Does anybody know if Aegon publish which funds can be selected to be invested in from the AVCs and can I literally pick whichever ones I wish?   

Thank you in advance for any help with my query. 

You are very welcome, but please note that we give information, not advice!

Paying AVCs are indeed a way of saving tax, as the usual intention is tax relief in, tax free out - but note that the tax free out is subject to HMRC limits.  Briefly, that limit is 25% of the notional value of your LGPS benefits plus your AVC pot.

That is,

20 X your LGPS pension (after any reductions for early payment)

Plus

1 X any automatic lump sum (from pre 2008 service)

Plus

1 X AVC fund

Total X 25% = maximum tax free cash (although that may have to be tweeked if the max sum exceeds your AVC and you want to commute some of your pension)

Note:  That's the old calculation.  Some LGPS's are now using a slightly different way of doing things, but the result won't be vastly different.

As you have a bit to go, don't stress about overshooting your AVC limit, as any excess can be used to buy additional index linked LGPS pension.

Can't help with investment funds, I'm afraid, as that isn't my forte - but I see that others have popped up with some information for you.

Stegor

Morning everyone. My wife works for the local council and has a small LGPS pension. She earns £590 a month so is well below the tax threshold and pays 5.5% into her pension. She is hoping to retire in the next 3 to 5 years, would she be better looking at buying extra years, paying for the in-house AVC, increasing her S&S Isa or opening a SIPP. We are so confused about all of the different options, thank you.

Albermarle

Stegor said:

Morning everyone. My wife works for the local council and has a small LGPS pension. She earns £590 a month so is well below the tax threshold and pays 5.5% into her pension. She is hoping to retire in the next 3 to 5 years, would she be better looking at buying extra years, paying for the in-house AVC, increasing her S&S Isa or opening a SIPP. We are so confused about all of the different options, thank you.

Most likely that all the pension options will be better than investing in a S&S ISA.

Regarding which option it will depend to some extent on what she wants  post retirement.
For example the LGPS pension will be paid regularly each month for the rest of her life. would it be desirable if these monthly lifetime payments were bigger? Or would it be preferable to be able to access more funds when she retires/or in the following few years?