LGPS Shared Cost AVC

RidingEast

Hi there.

My LGPS employer is now going to offer the SSAVC as well as the standard one with the Pru.  

I'm already in the standard AVC and have been contributing long enough to be eligible to buy extra LGPS years with the fund I’ve built up, though I've only been adding to it substantially in the last two years (varying between £500 and 1k a month).

The plan is to retire at 60 in 11 years time and take the maximum possible tax free.  At that time, I'll have 36 years in the LGPS.

The blurb from my employer mentions that the new SSAVC doesn't give you the ability to buy added years, just the top up LGPS pension -not complaining, that could be the best thing to plump for.  Also you'll automatically move onto the new terms of the SSAVC unless you specifically ask for your previous standard AVC contributions to be kept separate.

If there is any money left in the AVC after the tax free money is taken, what would be most financially beneficial; to have remained in the standard AVC and buy added years in the LGPS and possibly buy an index linked top up LGPS pension, missing out on the NI savings from the SSAVC?

OR keep both separate and perhaps use my retained rights to buy added years if there's enough cash left after the TFLS is taken?

OR roll both accounts into the new SSAVC and benefit from the NI savings and go for a top up LGPS pension & forget about buying added years in the LGPS?

Thanks to both posters who replied last night. I asked the forum admin to delete my previous thread & have named the discussion title more accurately this time.

RidingEast

Morning.

i suppose what I’m really wanting to get opinions on (if you take away all of the background info above) is should someone who has the right, due to paying AVCs for so long that it enables them to buy added years in the LGPS, retain the ability to do so, or is a LGPS index linked top up pension just as good to use up any leftover cash after the TFLS is take?

Thank you.

ussdave

@Silvertabby is our resident LGPS expert and may know the answer to your question.

I don't know the scheme that well but if you're intending to take max TFLS I suppose one question is whether or not you'll hit that amount in your AVC pot before retirement.  If the answer is no then I expect the extra tax breaks of SS will make up for other lost opportunities, as you want to avoid commutation of your regular LGPS benefits if at all possible.

QrizB

RidingEast said:

i suppose what I’m really wanting to get opinions on (if you take away all of the background info above) is should someone who has the right, due to paying AVCs for so long that it enables them to buy added years in the LGPS, retain the ability to do so, or is a LGPS index linked top up pension just as good to use up any leftover cash after the TFLS is take?

In the abstract, all the "extra pension" options within LGPS will have been costed by their actuaries and could be expected, for the average LGPS employee, to pay out a similar amount (for a given contribution) over your whole retired lifetime.
Which one is best for you will depend on your personal situation and intentions.

RidingEast

ussdave said:

@Silvertabby is our resident LGPS expert and may know the answer to your question.

I don't know the scheme that well but if you're intending to take max TFLS I suppose one question is whether or not you'll hit that amount in your AVC pot before retirement.  If the answer is no then I expect the extra tax breaks of SS will make up for other lost opportunities, as you want to avoid commutation of your regular LGPS benefits if at all possible.

Thanks.

I’m working on the X20 pension plus automatic TFLS plus AVC amount divided by 25% calculation & looking at options about what to do with any leftover money (buy extra years or get a top up with the LGPS).

I’m throwing everything I have at the AVC now & will do over the next ten years to make the most of it & this is where the salary sacrifice option comes into the mix.

If the option of buying extra years in the LGPS is the most financially beneficial option & not one to give up easily, I’ll consider that when making my decision in a few months whether to join the salary sacrifice AVC with my LGPS employer. 

Silvertabby

It really is impossible to answer 'will I be better off doing X,Y or Z' 10 years ahead of retirement.  The GAD factors in use now could well change - for better or worse - before then. 

You say that you have the option of buying extra years with your current AVCs - so you started this before November 2001?  

Most LGPSs seem to be using a slightly different 25% tax free cash calculation, but 20 X pension plus 1 X automatic lump sum plus 1 X AVC will be close enough for now.

Sorry not to be able to be more helpful, but we are really in crystal ball territory this far ahead of your intended retirement date.

RidingEast

Silvertabby said:

It really is impossible to answer 'will I be better off doing X,Y or Z' 10 years ahead of retirement.  The GAD factors in use now could well change - for better or worse - before then. 

You say that you have the option of buying extra years with your current AVCs - so you started this before November 2001?  

Most LGPSs seem to be using a slightly different 25% tax free cash calculation, but 20 X pension plus 1 X automatic lump sum plus 1 X AVC will be close enough for now.

Sorry not to be able to be more helpful, but we are really in crystal ball territory this far ahead of your intended retirement date.

Thanks for responding.

I’m pre 2001 so have the option of buying extra years. I’ve kept it ticking along over the years but have been putting hundreds in every month over the last two years - thanks to the learned folks on this site with great tips/sharing experiences.

Are buying years a good conversation rate much the same as the top up pension (1/60th)?

Drilling down into it, would it be better for someone to keep that quite rare option of buying more years, are they considered valuable in the LGPS world or would that be stupid for them to give up this perk in order to save those NI contributions now if they joined the SSAVC?

Thanks again.

Silvertabby

RidingEast said:

Silvertabby said:

It really is impossible to answer 'will I be better off doing X,Y or Z' 10 years ahead of retirement.  The GAD factors in use now could well change - for better or worse - before then. 

You say that you have the option of buying extra years with your current AVCs - so you started this before November 2001?  

Most LGPSs seem to be using a slightly different 25% tax free cash calculation, but 20 X pension plus 1 X automatic lump sum plus 1 X AVC will be close enough for now.

Sorry not to be able to be more helpful, but we are really in crystal ball territory this far ahead of your intended retirement date.

Thanks for responding.

I’m pre 2001 so have the option of buying extra years. I’ve kept it ticking along over the years but have been putting hundreds in every month over the last two years - thanks to the learned folks on this site with great tips/sharing experiences.

Are buying years a good conversation rate much the same as the top up pension (1/60th)?

Drilling down into it, would it be better for someone to keep that quite rare option of buying more years, are they considered valuable in the LGPS world or would that be stupid for them to give up this perk in order to save those NI contributions now if they joined the SSAVC?

Thanks again.

That's the problem - things change.  I've been retired for a few years now, but when dealing with pre 2001 AVCs we would run both calculations - added years and added pension - and pay the better of the two.  That was almost always added pension.

But GAD factors are subject to change, and I'm afraid that I don't know if that is still the case.  Or if the factors will change between now and when you intend to retire.

RidingEast

Silvertabby said:

RidingEast said:

Silvertabby said:

It really is impossible to answer 'will I be better off doing X,Y or Z' 10 years ahead of retirement.  The GAD factors in use now could well change - for better or worse - before then. 

You say that you have the option of buying extra years with your current AVCs - so you started this before November 2001?  

Most LGPSs seem to be using a slightly different 25% tax free cash calculation, but 20 X pension plus 1 X automatic lump sum plus 1 X AVC will be close enough for now.

Sorry not to be able to be more helpful, but we are really in crystal ball territory this far ahead of your intended retirement date.

Thanks for responding.

I’m pre 2001 so have the option of buying extra years. I’ve kept it ticking along over the years but have been putting hundreds in every month over the last two years - thanks to the learned folks on this site with great tips/sharing experiences.

Are buying years a good conversation rate much the same as the top up pension (1/60th)?

Drilling down into it, would it be better for someone to keep that quite rare option of buying more years, are they considered valuable in the LGPS world or would that be stupid for them to give up this perk in order to save those NI contributions now if they joined the SSAVC?

Thanks again.

That's the problem - things change.  I've been retired for a few years now, but when dealing with pre 2001 AVCs we would run both calculations - added years and added pension - and pay the better of the two.  That was almost always added pension.

But GAD factors are subject to change, and I'm afraid that I don't know if that is still the case.  Or if the factors will change between now and when you intend to retire.

Thanks.

I’ve not been able to find any info online about buying added years, I suppose it’s such a rare occurrence these days plus all the changes to the pension scheme haven’t helped 😀 

I’ll definitely go for the SSAVC when it’s rolled out, from what I’ve read on the forum, I’d be daft not to!

Thank you very much for the replies, it’s very much appreciated. Yourself and the other forumites have a wealth of knowledge & it’s good to hear experiences & consider other options.

jamjar92

My employer offered SSAVC, I left the old one as is, others transferred it. I decided to leave as is on chatting about the options with pension scheme. Originally was going to increase my pension to offset retiring earlier but now will be taking the max lump possible, maybe some from the pension offered I will run the figures again in 4 years when I am 60.

QrizB

jamjar92 said:

Originally was going to increase my pension to offset retiring earlier but now will be taking the max lump possible ...

The LGPS commutation rate of 12 means it's rarely a good idea to take the maximum lump sum. The minimum lump plus the max pension is a better choice for most people.

(This is an LGPS hread; if your employer isn't LGPS or any other public service body, this might not apply.)