LGPS LumpSum Advice please

Verulamium_Vixen

Hi, I have an LGPS Pension and am planning to retire at 60 in October 
I have been contributing 30 years ( since 1993) so there is an automatic lump sum of £36,000 and an annual pension of circa £24,500.
I also have a standard life AVC but only recently started paying into it and it is currently worth £6,500.
I am thinking of maximising my lump sum to the full amount of £118k which would give a reduced annual pension of circa £18k. I was also thinking of clearing out my AVC and taking the whole amount as a tax free lump sum.

Is this allowed and is it really all tax free?

I want to release money to pay back some debts and have some private surgery which the NHS has me on a very very long waiting list for. If I can release all that money I would then be left with approx £50k which will be put toward supporting me through a career change, enabling me to return to nursing as a Registered Nurse and start a new pension in the NHS pension scheme. 
I have already been told by the LGPS/LPPA that is allowed within the scheme rules.

Marcon

Verulamium_Vixen said:

Hi, I have an LGPS Pension and am planning to retire at 60 in October 
I have been contributing 30 years ( since 1993) so there is an automatic lump sum of £36,000 and an annual pension of circa £24,500.
I also have a standard life AVC but only recently started paying into it and it is currently worth £6,500.
I am thinking of maximising my lump sum to the full amount of £118k which would give a reduced annual pension of circa £18k. I was also thinking of clearing out my AVC and taking the whole amount as a tax free lump sum.

Is this allowed and is it really all tax free?

I want to release money to pay back some debts and have some private surgery which the NHS has me on a very very long waiting list for. If I can release all that money I would then be left with approx £50k which will be put toward supporting me through a career change, enabling me to return to nursing as a Registered Nurse and start a new pension in the NHS pension scheme. 
I have already been told by the LGPS/LPPA that is allowed within the scheme rules.

If you're already taking maximum tax free cash from your main scheme, you can't normally take more than 25% of a (defined contribution) AVC tax free.

I think the confusion arises because there is always plenty of publicity around the fact that paying AVCs means you can (often) take the whole AVC tax free, which in turn means you don't have to give up so much of your DB pension to maximise your tax free cash.

Silvertabby

As long as the AVC is in house/linked to the LGPS it's the other way round.  The AVC is all tax free, with the commutation limited to the total tax free amount.

I'm going to say it before someone else does.... using OP's figures, that's an awful lot of fully index linked annual pension to give up for a pretty poor commutation rate of 1:12.  

Albermarle

Exchanging £82K for £6,500 pa of guaranteed inflation linked pension, is a bad deal. For example to buy an annuity with similar T's & C's of £6,500 pa at age 60 , would cost about £170K.

Ideally you should take the minimum lump sum possible, maybe just enough to pay off any expensive debts and pay for the operation.

Verulamium_Vixen

Thanks everyone,  some useful advice. 
I'll rethink just how much I  actually need to free up and revisit taking max lump sum.

Cowster

Unless you really do not enjoy your job is flexible retirement an option?   if you reduced your hours or got a lesser paid job at 60 you could potentially claim your pension and (I think) claim the AVC at the same time.      You could then have your operation while still being paid and leave when you are ready to change your career.    

Verulamium_Vixen

Thanks for your input but I no longer enjoy my job, I can just about bear being there because I can see an end in sight.
Flexible retirement is an option but there are massive changes going on. The human side of service delivery is going to be replaced by bots and online self serve.
OK I could work with that but not all the staff have the software and there are no plans to buy any more licences due to costs.
That's before we even start thinking about those who are digitally excluded or the 10% who have literacy issues.
Unfortunately the consultants advising and the senior management do not come across people in these situations and when they do suggest these people can get help from the local library. 
Clearly they haven't been to a library lately and seen staffing and services have been cut to the core.
A number of my colleagues have taken Flexible Retirement and hate it, they are just doing the same jobs, managing the same number of staff in 3 days instead of 5.
Many chuck in the towel after 6 months.
The surgery I need doesn't need much recovery and can be done in annual leave. Unfortunately the NHS have parked me until things deteriorate further which is why I'm sorting it out myself.
It is what it is.

Thank you all so much for your advice,  I  do appreciate your time

Cowster

It sounds like you are doing the right thing then.    I agree trying to find efficiency savings when services have already cut to the bone does not usually support those that are most vulnerable.        Good luck with it all.

Redsox64

Sorry to jump in on this post but it raised a question in my mind?  If you get an automatic lump sum as part of LGPS (and are unlikely to commute any of your pension) does that count towards the 25% you can take tax free?

Silvertabby

Redsox64 said:

Sorry to jump in on this post but it raised a question in my mind?  If you get an automatic lump sum as part of LGPS (and are unlikely to commute any of your pension) does that count towards the 25% you can take tax free?

Yes, but only in relation to your LGPS pension plus any in house AVC. 

Albermarle

Redsox64 said:

Sorry to jump in on this post but it raised a question in my mind?  If you get an automatic lump sum as part of LGPS (and are unlikely to commute any of your pension) does that count towards the 25% you can take tax free?

You can take a tax free lump sum from any pension you have. If it is a DB pension like LGPS, the lump sum is not actually 25% ( as there is no specific sum to be 25% of) but a sum defined by a calculation in the scheme rules.
If it is a DC scheme it will be 25%.
If you have large pensions there is a total limit on how much tax free cash you can take.