Too late for AVC

Dizzyb99

I initially posted some time ago about starting an LGPS AVC with Prudential. Life and ailing parents overtook me and I unfortunately didn't get round to starting it. I am now in a position where I am considering retiring in November at 59, (a very tenuous consideration I have to add).

 I have between £20,000 and £40,000 to invest and will be looking at paying 500.00 in / month. This amount, plus the lump sum I receive from my pension will still fall below the 25% of my total pension pot so should (to my limited understanding) be tax free and it is for this reason that I am drawn to it.

I am incredibly risk averse and I really don't know whether it is too late to start this incase I do decide to retire this year.

Dazed_and_C0nfused

How much do you expect to earn in taxable pay this year i.e. the pay figure which will be on your P45 if you retire in November.

collins74

It’s not too late and if your scheme is run as salary sacrifice, then it’s incredibly tax efficient.  

For me LGPS members are very lucky to have this benefit and I wish I had known more about it years ago when I started my job in local government.  I am staggered by the amount of officers who do not use it and choose to max out their lump sum at the expense of income.  

I would not worry about investments etc. you could choose a cash fund or a default fund where the risk is lower to medium.  

The advice from me is to act fast and don’t procrastinate too much as you are missing an opportunity to make some massive tax savings each month. 

Nebulous2

I was in public sector schemes most of my working life, culminating in the LGPS. 

I never got round to AVCs, then contemplating retirement I signed up for £1000 a month (£800 net) with Prudential, leaving the money in cash. 

I did my sums and decided I could afford to retire almost immediately. I had contributed for 3 months and got £3000 back for something that had cost me £2400. 

The only issue was Prudential, their admin wasn’t very good and they took a few months to resolve it, but they did pay me compensation above the £3k. 

So I’d say it’s never too late. Unless you have substantial AVCs, above the cash-free level, there can be a very quick payback. 

Dizzyb99

Dazed_and_C0nfused said:

How much do you expect to earn in taxable pay this year i.e. the pay figure which will be on your P45 if you retire in November.

Not withstanding potential payrises (still in negotiation) approx £23,000 - £24,000

Dizzyb99

Thank you all for sharing your experiences. I will definitely get my procrastinating backside in to gear and get something sorted.

Dazed_and_C0nfused

Dizzyb99 said:

Dazed_and_C0nfused said:

How much do you expect to earn in taxable pay this year i.e. the pay figure which will be on your P45 if you retire in November.

Not withstanding potential payrises (still in negotiation) approx £23,000 - £24,000

That will be your limiting factor as far as personal (relief at source) contributions are concerned.

You pay the net contribution and the provider adds basic rate tax relief. 

So to get say £20k info the pension you would personally pay £16k and the basic rate relief is added to make it up to £20k.