LGPS APCs

joseph80

I am embarrassingly clueless on pensions but have been trying to get my head around my projections and options. 

I work in a school and pay into the LGPS. 

My NPA is 67.8137 which will be in 2045.

I am a higher rate tax payer (40%).

I have some disposable income that I am considering using to pay for APCs. I am quite risk averse, so have probably ruled the AVC route.

I am looking at my options and trying to calculate whether retiring at 60 could be an option. My projections are very encouraging although I understand that taking my pension early means a lower pension. My mortgage should be paid off by that point too. 

My main question is whether paying APCs is a good idea if I will be claiming my pension before my NPA?

Thank you for any advice you can give me on this (and please bear in mind my limited understanding in your replies)!!

Silvertabby

First questions:  Are you a teacher?  If yes, are you sure that you are in the LGPS and not the Teacher's Pension Scheme?  Sorry if you think that I'm trying to teach you to suck eggs, but back in my LGPS days we often received calls from teachers who assumed that because they worked for a XX County Council school they were in the XX Council pension scheme.....

If you are LGPS, then APCs are good value if you work/don't take payment of your benefits until (in your case) SPA, not quite so good if you plan on going early, as they would be reduced for early payment in the same way as your main scheme benefits.

Perhaps think again about AVCs?  Most people take these out for the double benefits of tax relief in / tax free (within HMRC limits) out.  They are a means of taking tax free cash on retirement without commuting the annual pension at the p.poor rate of 1:12.  Or you can use some or all of your AVCs to buy extra LGPS benefits.

joseph80

Silvertabby said:

First questions:  Are you a teacher?  If yes, are you sure that you are in the LGPS and not the Teacher's Pension Scheme?  Sorry if you think that I'm trying to teach you to suck eggs, but back in my LGPS days we often received calls from teachers who assumed that because they worked for a XX County Council school they were in the XX Council pension scheme.....

If you are LGPS, then APCs are good value if you work/don't take payment of your benefits until (in your case) SPA, not quite so good if you plan on going early, as they would be reduced for early payment in the same way as your main scheme benefits.

Perhaps think again about AVCs?  Most people take these out for the double benefits of tax relief in / tax free (within HMRC limits) out.  They are a means of taking tax free cash on retirement without commuting the annual pension at the p.poor rate of 1:12.  Or you can use some or all of your AVCs to buy extra LGPS benefits.

Thank you - no I am not a teacher, but I can understand why some get confused about this :-) I am definitely paying into the LGPS. 

I will have to look further into AVCs. Would that have the same disadvantages though if I were to retire at 60?

On a separate note, on my Annual Benefit Statement, in the section where it gives the 'Total benefits at 31 March 20XX', would the annual pension figure stated be the annual amount if I were to leave the school/stop paying into the scheme now, even if I were to claim it early (say at 55). I'm not saying I would do that by any means, just trying to understand all the separate elements of the statement.

(Just to confirm, I am not referring to the figure stated at the end of the statement which gives the 'Projections if you remain contributing to the scheme until your NPA'). 

Thank you again for your comments. 

Bue21

On a separate note, on my Annual Benefit Statement, in the section where it gives the 'Total benefits at 31 March 20XX', 

I believe the benefits are what you have built up so far so, if you stopped paying now but don’t draw the pension until SPA, that is the amount you would get (adjusted to account for inflation at that time). If you take your pension before SPA you would get less than this figure. The level of reductions applied is available on the LGPS website.

Silvertabby

Bue21 is right about your current benefit statement.

If you were to take all of your AVCs as tax free cash, then you would get your total investment, even if you opt to retire early.

But if you opt to use some or all of your AVCs to buy additional LGPS benefits then the factors are age related.  ie, XX amount of AVCs will buy more LGPS pension at 67/SPA than the same amount of AVCs at at 60.

seans_elysees

Silvertabby said:

Bue21 is right about your current benefit statement.

If you were to take all of your AVCs as tax free cash, then you would get your total investment, even if you opt to retire early.

But if you opt to use some or all of your AVCs to buy additional LGPS benefits then the factors are age related.  ie, XX amount of AVCs will buy more LGPS pension at 67/SPA than the same amount of AVCs at at 60.

Hi Silvertabby,

Apologies for jumping in on this old thread. (I’m sure you’ve also provided some good LGPS advice to me on other threads). 

I’m specifically interested in the process for converting AVCs to APC. 

Say I build a healthy pot of AVC that I want to take at 64 as 100% tax free. If I convert some of that AVC pot into APC is that typically just done under the standard lump sum rates for purchasing APC. In which case, I’d have had the benefit of compounding in AVC and achieved greater purchasing power at the back end? 

Silvertabby

seans_elysees said:

Silvertabby said:

Bue21 is right about your current benefit statement.

If you were to take all of your AVCs as tax free cash, then you would get your total investment, even if you opt to retire early.

But if you opt to use some or all of your AVCs to buy additional LGPS benefits then the factors are age related.  ie, XX amount of AVCs will buy more LGPS pension at 67/SPA than the same amount of AVCs at at 60.

Hi Silvertabby,

Apologies for jumping in on this old thread. (I’m sure you’ve also provided some good LGPS advice to me on other threads). 

I’m specifically interested in the process for converting AVCs to APC. 

Say I build a healthy pot of AVC that I want to take at 64 as 100% tax free. If I convert some of that AVC pot into APC is that typically just done under the standard lump sum rates for purchasing APC. In which case, I’d have had the benefit of compounding in AVC and achieved greater purchasing power at the back end? 

AVCs and APCs are two different ways of increasing your LGPS benefits, and one can't be converted to the other.

If you choose the AVC route, and opt to use some or all of your AVC funds to buy additional LGPS benefits, then that would be in the form of a LGPS annuity, with the option of including survivor's benefits or not.  The factors for AVC annuities are age related, as explained above.

AVC funds can't be used to buy APCs.  If you were go down the APC route, you would have the option of buying them by a one-off lump sum or by setting up a monthly payment contract (both prior to retirement).  Different factors are used, and amounts purchased are subject to early payment reductions,  even if you were to be made redundant.  

seans_elysees

Silvertabby said:

seans_elysees said:

Silvertabby said:

Bue21 is right about your current benefit statement.

If you were to take all of your AVCs as tax free cash, then you would get your total investment, even if you opt to retire early.

But if you opt to use some or all of your AVCs to buy additional LGPS benefits then the factors are age related.  ie, XX amount of AVCs will buy more LGPS pension at 67/SPA than the same amount of AVCs at at 60.

Hi Silvertabby,

Apologies for jumping in on this old thread. (I’m sure you’ve also provided some good LGPS advice to me on other threads). 

I’m specifically interested in the process for converting AVCs to APC. 

Say I build a healthy pot of AVC that I want to take at 64 as 100% tax free. If I convert some of that AVC pot into APC is that typically just done under the standard lump sum rates for purchasing APC. In which case, I’d have had the benefit of compounding in AVC and achieved greater purchasing power at the back end? 

AVCs and APCs are two different ways of increasing your LGPS benefits, and one can't be converted to the other.

If you choose the AVC route, and opt to use some or all of your AVC funds to buy additional LGPS benefits, then that would be in the form of a LGPS annuity, with the option of including survivor's benefits or not.  The factors for AVC annuities are age related, as explained above.

AVC funds can't be used to buy APCs.  If you were go down the APC route, you would have the option of buying them by a one-off lump sum or by setting up a monthly payment contract (both prior to retirement).  Different factors are used, and amounts purchased are subject to early payment reductions,  even if you were to be made redundant.  

Thank you so much. 👍

91highstreet

Hi there can I jump on this AVC thread also pretty pension clueless 
my position is I have NHS pension which I have taken at 55 ( retire and returned ) but still pay into the NHS 2015 scheme 
I am in the 40% tax bracket and want to reduce my tax burden by paying into Standard life AVC schemes ( no point paying more to nhs scheme as I am single and it dies with me should I pass ) 
I am struggling to choose a fund in their portfolio ( there are so many they are overwhelming) 
I want fairly low risk drawdown I think as I would like to reduce my hours going forward into retirement I am 57 yrs old and may not want to continue until 67 
Any suggestions would be very welcome
many thanks 

AlanP_2

91highstreet said:

Hi there can I jump on this AVC thread also pretty pension clueless 
my position is I have NHS pension which I have taken at 55 ( retire and returned ) but still pay into the NHS 2015 scheme 
I am in the 40% tax bracket and want to reduce my tax burden by paying into Standard life AVC schemes ( no point paying more to nhs scheme as I am single and it dies with me should I pass ) 
I am struggling to choose a fund in their portfolio ( there are so many they are overwhelming) 
I want fairly low risk drawdown I think as I would like to reduce my hours going forward into retirement I am 57 yrs old and may not want to continue until 67 
Any suggestions would be very welcome
many thanks 

To avoid confusion I suggest you concentrate on the new discussion you have started on this subject and not try and follow 2 lots of suggestions spread across topics.

Some of the additional information you have provided here is missing from your main post and answers some of the points I have raised there.