Paying more in to the lgps.

kevwallis

A question to the lgps guru,s I wish to increase my LGPS annual pension before l retire, do I over pay my prudential AVC or do I go down the APC (additional pension contributions ) route, which one would give me a better financial outcome, I’m currently getting close to maxing my avc according to the lgps maximum AVC lump sum calculator, thanking you in advance. 

dunstonh

You also the have the options of a personal pension, LISA and S&S ISA.

Every option will have its pros and cons and you need to match one or more up to your objectives to decide which is best.

kevwallis

Too old for a Lisa , 61 years old, currently hammering my S&S isa…. That’s why I was looking at the apc, but thanks for the suggestions 

Aylesbury_Duck

kevwallis said:

Too old for a Lisa , 61 years old, currently hammering my S&S isa…. That’s why I was looking at the apc, but thanks for the suggestions 

You're in a similar situation to me.  I am heading for my AVC pot being in excess of 25% of my total LGPS plus AVC pot, but I'm also up to my £60k contribution limit (and have no unused allowance from prior years) so have ruled out APCs.  I'm probably going to take as much of the AVC pot as a TFLS as I can when I begin drawing the LGPS, and buy extra LGPS entitlement with any excess.

The way I see it, APCs provide certainty of income between retirement and death, whereas AVCs give you more flexibility (TFLS, drawdown, annuity, buying more LGPS) and they're inheritable in full should you die prematurely.  No one can tell you which will "give you a better financial outcome" unless, frankly, you know when you're going to die.

MX5huggy

Not only when you’re going to die but the investment performance of the investments in the AVC. 

I would stick with AVC and not worry about going over the TFLS limit. Especially if you’re doing Salary Sacrifice if you’re not then maybe a SIPP could be considered because the  NI saving is only there with Salary Sacrifice, but the SIPP would not give you the option buying more LGPS, the rates are good compared to open market Anunites.  

If you’re 61 have you actually checked if you could retire now. I’ve had colleagues not realise they could retire today on say £24k per year instead of earning £36, so really they are working for just £12k per year. 

daveyjp

All down to personal circumstances, years of membership etc, but at 61 flexible retirement may be an option, you my find your drop in income is negligible.

kevwallis

Thank for the suggestions, I’m currently looking at either flexible retirement in 12 months or full time retirement in 18 months, I have 36 years in the lgps, I started my S&S isa and avc in 2017 both have done reasonably well….i could salary sacrifice my avc but I contribute to much of my salary consequently my take home pay falls below the minimum wage, i decided the investment and larger contribution would be more beneficial, I recently change my fund to a less volatile fund shortly after the us elections. 

Silvertabby

How old will you be when you retire?

APCs are good value if you intend working/not taking your pension before SPA, perhaps not so much if you want to go much earlier due to the early payment actuarial reductions.

Most people do take out AVCs for the double benefit of tax relief in, tax free out, but any residual AVCs may be used to buy additional index linked LGPS pension (with or without spouse's benefits - your choice).  The factors for converting AVC funds to LGPS benefits are age related, so £XX AVCs will buy less pension at, say, 60 than the same amount of AVCs at 65. 

kevwallis

I,m thinking possibly full retirement approximately 62.5 at that point I will have 37.5 years in the lgps, I will very shortly start to over pay into my avc… I am favouring the idea of over paying into my avc and purchasing additional index linked LGPS pension, I do like the Sercurity that the Lgps pension brings to my potential retirement. Thanks 

MX5huggy

kevwallis said:

Thank for the suggestions, I’m currently looking at either flexible retirement in 12 months or full time retirement in 18 months, I have 36 years in the lgps, I started my S&S isa and avc in 2017 both have done reasonably well….i could salary sacrifice my avc but I contribute to much of my salary consequently my take home pay falls below the minimum wage, i decided the investment and larger contribution would be more beneficial, I recently change my fund to a less volatile fund shortly after the us elections. 

Not salary sacrificing is a bad plan your missing out on an 8% NI saving on all your contributions that are taxed at basic rate and 2% on those taxed at higher rate. You should SS to NMW then send the rest to a SIPP. 

kevwallis

MX5huggy,
 yes your right, I’ve just run through the figures…… if I decide to purchase extra Lgps pension I can use what’s already in the fund, thank you