LGPS Shared Cost AVC question

Toriaizu

Good afternoon, 
I work in local government and am a member of the LGPS. I've never had an AVC. I have no other pensions. I've just been offered the opportunity to join the AVC Wise Shared Cost AVC through my work scheme. I'm 61 and intend to retire in about 3 years. The AVC uses both tax and NI relief to effectively make each £68.12 I contribute worth £100 in my pot. I intend to take my whole AVC pot as a tax free lump sum when I retire. Given that's only a few years away is there any good reason not to divert as much of my savings as the scheme will allow, via the maximum monthly contribution allowed based on my salary? I'm aware of the 25% maximum tax free rule 

Toriaizu

I hit post too early so just to add " divert into the AVC from my savings ie cash ISA and shares, as in 3 years they can't possibly outperform the AVC due to the instant 'growth' at the point of entry, unless I choose high risk investments)?

OldBeanz

Toriaizu said:

I hit post too early so just to add " divert into the AVC from my savings ie cash ISA and shares, as in 3 years they can't possibly outperform the AVC due to the instant 'growth' at the point of entry, unless I choose high risk investments)?

AVC's taken with the main LGPS pension is the icing on top of the cake. With Salary Sacrifice this is the cherry on top of the icing. You will be restricted to ensure your contributions do not take you below minimum wage. 
While we cannot make recommendations on here...
Which funds you invest in depends on what other funds you have and if you are going to spend all the money on the day you retire or re-invest i.e. low risk if spending on day 1 and more considered risk if investing long term.

Toriaizu

OldBeanz said:

Toriaizu said:

I hit post too early so just to add " divert into the AVC from my savings ie cash ISA and shares, as in 3 years they can't possibly outperform the AVC due to the instant 'growth' at the point of entry, unless I choose high risk investments)?

AVC's taken with the main LGPS pension is the icing on top of the cake. With Salary Sacrifice this is the cherry on top of the icing. You will be restricted to ensure your contributions do not take you below minimum wage. 
While we cannot make recommendations on here...
Which funds you invest in depends on what other funds you have and if you are going to spend all the money on the day you retire or re-invest i.e. low risk if spending on day 1 and more considered risk if investing long term.

Thank you for your reply. I'm aware of the need to stay above minimum wage level and due to that my employer has set my maximum monthly contribution to the AVC at a certain level . So I plan to contribute that maximum and subsidise my monthly wages as necessary by using some of my savings ie effectively diverting as much of my savings as possible into the AVC for 3 years. I've chosen a low risk find within the AVC, like you've suggested, as I intend to use the tax free lump sum in 3 years time for various purposes. Some of those will involve investment, some just spending, I'd like to keep my options open about the detail until then. I like your description of cake, icing and cherry, I've always been fond of cake .

Toriaizu

Fund not find, typo. 

OldBeanz

If you were a true mercenary you could also ask to contribute on top without SalSac contributing enough to ensure you paid no income tax.

Toriaizu

OldBeanz said:

If you were a true mercenary you could also ask to contribute on top without SalSac contributing enough to ensure you paid no income tax.

How would that work? Please explain in the simplest terms.  Any risks or downsides? 

OldBeanz

Toriaizu said:

OldBeanz said:

If you were a true mercenary you could also ask to contribute on top without SalSac contributing enough to ensure you paid no income tax.

How would that work? Please explain in the simplest terms.  Any risks or downsides? 

My wife does not have Sal Sac available to her so can contribute as much as she wants so does so to ensure she pays no tax.

Toriaizu

Thanks I'll investigate the possibility 

OldBeanz

Toriaizu said:

Thanks I'll investigate the possibility 

Note LGPS is a net pay pension so tax relief is only given on tax paid i.e. down to your personal allowance.

Toriaizu

OldBeanz said:

Toriaizu said:

Thanks I'll investigate the possibility 

Note LGPS is a net pay pension so tax relief is only given on tax paid i.e. down to your personal allowance.

Thanks again