LGPS & SIPP planning for tax efficient retirement savings & income

leosayer

Another LGPS-related post!

My wife is planning to retire in a couple of years time and we want to make sure her ducks are in a row with regard to retirement income provision.

The are the facts and our plan:

-1970 wife born

-1997 became a member of LGPS and has had uninterrupted membership since then

-2019 started saving into SIPP

-2025 (age 55) planning to retire and start SIPP drawdown using personal allowance

-2030 (age 60) planning to commence LGPS pension 

The SIPP contribution + LGPS accruals means that most of her annual allowance has been used for the past few years.

Her annual income is slightly below £40k and unfortunately salary sacrifice is not available.

No other income expected past age 55.

I have utilised most of my LTA so our goal is to maximise tax efficiency for my wife's income during retirement. 

A few questions:

- Do you you see and gaps or further considerations with this plan?

- I realise the 85 year rule will apply to the LGPS pension she built up to March 2008 and is designed to protect the retirement age of 60. For this slice of the pension, if she commences at age 58 will this equate to 2 years early or 7 years early?  

-  The above doesn't consider the potential benefits of AVC tax free cash. Are we missing something by contributing only via the SIPP? Could/should we consider transferring the SIPP to to the AVC if that's possible?

Thanks for your help.

AlanP_2

As the AVC pot could be taken as part of the tax free element I would certainly be considering using it.

Must be taken at same time as main scheme benefits so still nedd SIPP / something for 55-60.

mark55man

The advantages of the AVC is that you can take the PCLS from it rather than commuting the income.

Without that modern SIPPs are usually more flexible and cheaper so if you don't want the above benefit that may be better for you 

I cant help with the rule of 85 - you need a scheme expert for that

OldBeanz

You are not able to transfer a SIPP to an AVC at this stage.
Your wife should be looking to pay into an AVC all her taxable income (Salary - tax allowance -LGPS contributions) on the assumption she has enough money for the 5 years but she will still have the ability to contribute 80% of £12570 as well to the SIPP. She will be able to draw the money with her LGPS pension tax free as she does not have time to go over the limits. 

LHW99

Even when she finishes working, you could contribute £2880 pa to her SIPP and she would get £720 tax relief paid in (if that suits your finances).