LGPS - lump sum payments

Paul_255

I am currently drawing 3 x deferred LGPS pensions from 3 x LA's I was employed by.
I started drawing them in the current financial year.
From one LGPS pension I drew down a lump sum of £60,000 to do a loft extension which is currently ongoing.
I stopped paying into that scheme in 2013.
I am now employed in a different LA , I am in the LGPS and I wish to make a £30,000 APC payment into the LGPS scheme.
This £30,000 will be mostly BTL income.
Would this fall foul of the recycling rule. ???
When I retire in 2030 can I take 25% lump sum of all my available pensions (excluding the one that I have already taken a lump sum from) or is only the current pension that I can take 25% cash from.

Thanks.

Dazed_and_C0nfused

Paul_255 said:

I am currently drawing 3 x deferred LGPS pensions from 3 x LA's I was employed by.
I started drawing them in the current financial year.
From one LGPS pension I drew down a lump sum of £60,000 to do a loft extension which is currently ongoing.
I stopped paying into that scheme in 2013.
I am now employed in a different LA , I am in the LGPS and I wish to make a £30,000 APC payment into the LGPS scheme.
This £30,000 will be mostly BTL income.
Would this fall foul of the recycling rule. ???
When I retire in 2030 can I take 25% lump sum of all my available pensions (excluding the one that I have already taken a lump sum from) or is only the current pension that I can take 25% cash from.

Thanks.

Perhaps you could clarify a few things.

Are you now working and accruing benefits for a fourth time in LGPS

Ignoring the real source of the £30k do you have pensionable earnings from your current (LGPS) employer to make this contribution eligible for tax relief?

Do you understand how the tax relief works with such a lump sum payment?

Paul_255

Hi Dazed and Confused (Led Zeppelin ???)

Thanks for replying to my post.

Are you now working and accruing benefits for a fourth time in LGPS

Yes
I am paying into the LGPS for a fourth time.
Accruing benefits ???

Ignoring the real source of the £30k do you have pensionable earnings from your current (LGPS) employer to make this contribution eligible for tax relief?

This will be a lump sum payment - not deducted from my salary
I will have taxable income that this will be offset against.

Do you understand how the tax relief works with such a lump sum payment?
I would like to think so. 

Silvertabby

If you are in receipt of 3 X LGPS pensions, but only opted to take a lump sum from one of them, then you can't take lump sums from the other 2 when you finally retire.  What's done is done.

You will be able to take a lump sum from your current pension, but only if you commute (give up some of your fully index linked for life LGPS pension in return for a one off tax free lump sum).  As the LGPS commutation rate is a pretty poor 1:12, do you really need a lump sum?

Paul_255

Thanks Silvertabby

1:12 seems pretty good to me ???

Do you have any views on the first part of the query.

I am currently drawing 3 x deferred LGPS pensions from 3 x LA's I was employed by.
I started drawing them in the current financial year.
From one LGPS pension I drew down a lump sum of £60,000 to do a loft extension which is currently ongoing.
I stopped paying into that scheme in 2013.
I am now employed in a different LA , I am in the LGPS and I wish to make a £30,000 APC payment into the LGPS scheme.
This £30,000 will be mostly BTL income.
Would this fall foul of the recycling rule. ???

Dazed_and_C0nfused

1:12 seems pretty good to me ???

You're not serious?  Or do you have a life limiting illness?

Silvertabby

Paul_255 said:

Thanks Silvertabby

1:12 seems pretty good to me ???

Do you have any views on the first part of the query.

I am currently drawing 3 x deferred LGPS pensions from 3 x LA's I was employed by.
I started drawing them in the current financial year.
From one LGPS pension I drew down a lump sum of £60,000 to do a loft extension which is currently ongoing.
I stopped paying into that scheme in 2013.
I am now employed in a different LA , I am in the LGPS and I wish to make a £30,000 APC payment into the LGPS scheme.
This £30,000 will be mostly BTL income.
Would this fall foul of the recycling rule. ???

It may do, unless you can prove that this £30K is your BTL income and that you didn't take the lump sum with the intention of using some or all of it to buy APCs.  Note that in the case of claiming tax relief for APC lump sum payments, that's 100% between you and HMRC.    

On the subject of APCs, are you aware that they are a good deal if you don't take your LGPS pension before SPA, perhaps not so much if you want to retire earlier, due to the early payment actuarial reductions?

Have you considered AVCs?  Making the maximum payment per month wouldn't be classed as pension re-cycling and, if you get your sums right, you could get the lot tax relief in/tax free out.  Even if you went over the tax free limit, you could use the residual to buy extra LGPS benefits.

As for 1:12 seeming pretty good.....brace yourself!

Linton

Paul_255 said:

Thanks Silvertabby

1:12 seems pretty good to me ???

Do you have any views on the first part of the query.

I am currently drawing 3 x deferred LGPS pensions from 3 x LA's I was employed by.
I started drawing them in the current financial year.
From one LGPS pension I drew down a lump sum of £60,000 to do a loft extension which is currently ongoing.
I stopped paying into that scheme in 2013.
I am now employed in a different LA , I am in the LGPS and I wish to make a £30,000 APC payment into the LGPS scheme.
This £30,000 will be mostly BTL income.
Would this fall foul of the recycling rule. ???

1:12 is bad for transferring income to a lump sum unless you have a very good reason to believe you won't live another 12 years.  You havent stated your age, but average life expectancy tables show that at around 60 years old you have a 85-90% (depending on gender) chance of being alive 12 years later.  You certainly could not replace the LGPS guaranteed income with returns from investing the lump sum.  1:30 is about the point at which a lump sum becomes justifiable by providing a higher income.

If you can show that the £60K is used for the loft extension I believe you will not have a problem with recycling.  it apppears that no-one has ever been caught by the pension recycling rules. They appear to be a warning shot to discourage creative accountants and financial advisors.

Albermarle

With regard to 1:12, one thing you are probably not taking into account is the inflation linked increases with the pension. Often people do not realise how valuable this is.
For info, the typical commutation rate for a private sector pension is 20 to 23, although usually the inflation linking is not as good, so for an LGPS type pension it probably needs to be higher than that, to be worthwhile.

jamjar92

If your employer does Salary sacrifice pay the max per month into an avc, and use the 30k to live on. Tax relief will be done at source. You can change the amount you pay each month by month as circumstances change. You can normally take avc has a tax free lump sum, better than converting pension to lump sum.