LGPS + AVC: 25% tax free limit

seans_elysees

I’m in LGPS and also contribute a decent amount to AVC. I understand that I can take the AVC 100% tax free if I take it at the same time as LGPS as long as:

1) It doesn’t make up more than 25% of combined LGPS+AVC value. 

2) Limited to £268k max. ? 

My question is about the £268k limit. Is that a tax free limit that is assigned to me as an individual for all my pensions combined? 

I have other SIPPs that would normally qualify for 25% tax free on draw down. Would each draw down from those consume part of the £268k limit before I got to start taking LGPS AVC lump sum? 

Dazed_and_C0nfused

seans_elysees said:

I’m in LGPS and also contribute a decent amount to AVC. I understand that I can take the AVC 100% tax free if I take it at the same time as LGPS as long as:

1) It doesn’t make up more than 25% of combined LGPS+AVC value. 

2) Limited to £268k max. ? 

My question is about the £268k limit. Is that a tax free limit that is assigned to me as an individual for all my pensions combined? 

I have other SIPPs that would normally qualify for 25% tax free on draw down. Would each draw down from those consume part of the £268k limit before I got to start taking LGPS AVC lump sum? 

Basically yes. It is per person.

https://techzone.abrdn.com/public/pensions/Tech-guide-tax-free-cash

Silvertabby

seans_elysees said:

I’m in LGPS and also contribute a decent amount to AVC. I understand that I can take the AVC 100% tax free if I take it at the same time as LGPS as long as:

1) It doesn’t make up more than 25% of combined LGPS+AVC value. 

2) Limited to £268k max. ? 

My question is about the £268k limit. Is that a tax free limit that is assigned to me as an individual for all my pensions combined? 

I have other SIPPs that would normally qualify for 25% tax free on draw down. Would each draw down from those consume part of the £268k limit before I got to start taking LGPS AVC lump sum? 

Yes, that's your limit across all pensions.  Each pension provider, including the LGPS, will ask you for details of your other pensions so they don't bust the tax free limit. 

If your LGPS AVC does exceed the (total) limit, then you could use the excess to buy additional fully index linked LGPS benefits.

seans_elysees

Silvertabby said:

seans_elysees said:

I’m in LGPS and also contribute a decent amount to AVC. I understand that I can take the AVC 100% tax free if I take it at the same time as LGPS as long as:

1) It doesn’t make up more than 25% of combined LGPS+AVC value. 

2) Limited to £268k max. ? 

My question is about the £268k limit. Is that a tax free limit that is assigned to me as an individual for all my pensions combined? 

I have other SIPPs that would normally qualify for 25% tax free on draw down. Would each draw down from those consume part of the £268k limit before I got to start taking LGPS AVC lump sum? 

Yes, that's your limit across all pensions.  Each pension provider, including the LGPS, will ask you for details of your other pensions so they don't bust the tax free limit. 

If your LGPS AVC does exceed the (total) limit, then you could use the excess to buy additional fully index linked LGPS benefits.

Thanks. 👍 

I’m really struggling to get any info from my LGPS provider about the process for buying that additional LGPS pension in that scenario. I appreciate that it would be a hypothetical as things may well change before then, but I’d like to know the conversion rate, and whether there’s a limit on how much can be converted. (I know, for example that APCs have a £8,030 max. in terms of how much additional benefit can be purchased). 

Silvertabby

seans_elysees said:

Silvertabby said:

seans_elysees said:

I’m in LGPS and also contribute a decent amount to AVC. I understand that I can take the AVC 100% tax free if I take it at the same time as LGPS as long as:

1) It doesn’t make up more than 25% of combined LGPS+AVC value. 

2) Limited to £268k max. ? 

My question is about the £268k limit. Is that a tax free limit that is assigned to me as an individual for all my pensions combined? 

I have other SIPPs that would normally qualify for 25% tax free on draw down. Would each draw down from those consume part of the £268k limit before I got to start taking LGPS AVC lump sum? 

Yes, that's your limit across all pensions.  Each pension provider, including the LGPS, will ask you for details of your other pensions so they don't bust the tax free limit. 

If your LGPS AVC does exceed the (total) limit, then you could use the excess to buy additional fully index linked LGPS benefits.

Thanks. 👍 

I’m really struggling to get any info from my LGPS provider about the process for buying that additional LGPS pension in that scenario. I appreciate that it would be a hypothetical as things may well change before then, but I’d like to know the conversion rate, and whether there’s a limit on how much can be converted. (I know, for example that APCs have a £8,030 max. in terms of how much additional benefit can be purchased). 

APCs and buying extra benefits from AVCs are two quite different things.  In theory, you could use all of your AVC fund to buy additional pension - the £8,030 max only applies to APCs.

Strictly speaking, when you use AVCs to buy additional benefits, you are buying a LGPS annuity.  But LGPS administrators don't tend to use the word 'annuity' because it confuses  some people!  Like any other annuity, the factors are age related.  ie, £10K at age 66 will buy a higher 'annuity' than at age 55.  On the other hand, you have the choice of buying additional survivor's benefits in return for a modest reduction to your own benefits.  Plus, the added bonus of the annuity being fully index linked (CPI).

seans_elysees

Silvertabby said:

seans_elysees said:

Silvertabby said:

seans_elysees said:

I’m in LGPS and also contribute a decent amount to AVC. I understand that I can take the AVC 100% tax free if I take it at the same time as LGPS as long as:

1) It doesn’t make up more than 25% of combined LGPS+AVC value. 

2) Limited to £268k max. ? 

My question is about the £268k limit. Is that a tax free limit that is assigned to me as an individual for all my pensions combined? 

I have other SIPPs that would normally qualify for 25% tax free on draw down. Would each draw down from those consume part of the £268k limit before I got to start taking LGPS AVC lump sum? 

Yes, that's your limit across all pensions.  Each pension provider, including the LGPS, will ask you for details of your other pensions so they don't bust the tax free limit. 

If your LGPS AVC does exceed the (total) limit, then you could use the excess to buy additional fully index linked LGPS benefits.

Thanks. 👍 

I’m really struggling to get any info from my LGPS provider about the process for buying that additional LGPS pension in that scenario. I appreciate that it would be a hypothetical as things may well change before then, but I’d like to know the conversion rate, and whether there’s a limit on how much can be converted. (I know, for example that APCs have a £8,030 max. in terms of how much additional benefit can be purchased). 

APCs and buying extra benefits from AVCs are two quite different things.  In theory, you could use all of your AVC fund to buy additional pension - the £8,030 max only applies to APCs.

Strictly speaking, when you use AVCs to buy additional benefits, you are buying a LGPS annuity.  But LGPS administrators don't tend to use the word 'annuity' because it confuses  some people!  Like any other annuity, the factors are age related.  ie, £10K at age 66 will buy a higher 'annuity' than at age 55.  On the other hand, you have the choice of buying additional survivor's benefits in return for a modest reduction to your own benefits.  Plus, the added bonus of the annuity being fully index linked (CPI).

Yeah, I get that it’s totally different from the APC route. 

If you’re suggesting I could use the whole AVC pot then that’s good to know that there’s no limit as such. That would answer my main question. 👍

I found a policy document that confirms the conversion rate by age. It would be good if my LGPS provider were able to surface that information if that is indeed what they are working to. 

https://pensions.gov.scot/sites/default/files/2020-11/LGPS_SAVCConversionToAddPensionGuidance.pdf

Silvertabby

seans_elysees said:

Silvertabby said:

seans_elysees said:

Silvertabby said:

seans_elysees said:

I’m in LGPS and also contribute a decent amount to AVC. I understand that I can take the AVC 100% tax free if I take it at the same time as LGPS as long as:

1) It doesn’t make up more than 25% of combined LGPS+AVC value. 

2) Limited to £268k max. ? 

My question is about the £268k limit. Is that a tax free limit that is assigned to me as an individual for all my pensions combined? 

I have other SIPPs that would normally qualify for 25% tax free on draw down. Would each draw down from those consume part of the £268k limit before I got to start taking LGPS AVC lump sum? 

Yes, that's your limit across all pensions.  Each pension provider, including the LGPS, will ask you for details of your other pensions so they don't bust the tax free limit. 

If your LGPS AVC does exceed the (total) limit, then you could use the excess to buy additional fully index linked LGPS benefits.

Thanks. 👍 

I’m really struggling to get any info from my LGPS provider about the process for buying that additional LGPS pension in that scenario. I appreciate that it would be a hypothetical as things may well change before then, but I’d like to know the conversion rate, and whether there’s a limit on how much can be converted. (I know, for example that APCs have a £8,030 max. in terms of how much additional benefit can be purchased). 

APCs and buying extra benefits from AVCs are two quite different things.  In theory, you could use all of your AVC fund to buy additional pension - the £8,030 max only applies to APCs.

Strictly speaking, when you use AVCs to buy additional benefits, you are buying a LGPS annuity.  But LGPS administrators don't tend to use the word 'annuity' because it confuses  some people!  Like any other annuity, the factors are age related.  ie, £10K at age 66 will buy a higher 'annuity' than at age 55.  On the other hand, you have the choice of buying additional survivor's benefits in return for a modest reduction to your own benefits.  Plus, the added bonus of the annuity being fully index linked (CPI).

Yeah, I get that it’s totally different from the APC route. 

If you’re suggesting I could use the whole AVC pot then that’s good to know that there’s no limit as such. That would answer my main question. 👍

I found a policy document that confirms the conversion rate by age. It would be good if my LGPS provider were able to surface that information if that is indeed what they are working to. 

https://pensions.gov.scot/sites/default/files/2020-11/LGPS_SAVCConversionToAddPensionGuidance.pdf

The factors will give you a good idea, but there's more to the calculation than just these.

I know from my own LGPS administrator days that we didn't really push this sort of  information.  Let's just say that some fund members suffered from selective reading, cherry picked the good bits, ignored the bad and ended up with a totally wrong figure.  And we were the bad guys when we tried to explain where they had gone wrong.

collins74

Interesting thread this.  I have increased my AVC within LGPS to deliberately go over the tax free cash limit allowed and leave a decent amount for an additional pension.  This means I have less cash savings however I want to retire early and know I will need an additional amount on top of my pension.

One issue could be the Government rules and if they ever reduce the max lump sum to say £100k.  That would mean less savings at retirement for me but I could buy a bigger pension and possibly go a bit earlier than intended.

For me income is massively important and I would be relaxed with less in the bank if the government changed the lump sum limit as I know I would have a greater income and would not draw on the savings as much as was intended, 

hyubh

seans_elysees said:

Silvertabby said:

seans_elysees said:

Silvertabby said:

seans_elysees said:

I’m in LGPS and also contribute a decent amount to AVC. I understand that I can take the AVC 100% tax free if I take it at the same time as LGPS as long as:

1) It doesn’t make up more than 25% of combined LGPS+AVC value. 

2) Limited to £268k max. ? 

My question is about the £268k limit. Is that a tax free limit that is assigned to me as an individual for all my pensions combined? 

I have other SIPPs that would normally qualify for 25% tax free on draw down. Would each draw down from those consume part of the £268k limit before I got to start taking LGPS AVC lump sum? 

Yes, that's your limit across all pensions.  Each pension provider, including the LGPS, will ask you for details of your other pensions so they don't bust the tax free limit. 

If your LGPS AVC does exceed the (total) limit, then you could use the excess to buy additional fully index linked LGPS benefits.

Thanks. 👍 

I’m really struggling to get any info from my LGPS provider about the process for buying that additional LGPS pension in that scenario. I appreciate that it would be a hypothetical as things may well change before then, but I’d like to know the conversion rate, and whether there’s a limit on how much can be converted. (I know, for example that APCs have a £8,030 max. in terms of how much additional benefit can be purchased). 

APCs and buying extra benefits from AVCs are two quite different things.  In theory, you could use all of your AVC fund to buy additional pension - the £8,030 max only applies to APCs.

Strictly speaking, when you use AVCs to buy additional benefits, you are buying a LGPS annuity.  But LGPS administrators don't tend to use the word 'annuity' because it confuses  some people!  Like any other annuity, the factors are age related.  ie, £10K at age 66 will buy a higher 'annuity' than at age 55.  On the other hand, you have the choice of buying additional survivor's benefits in return for a modest reduction to your own benefits.  Plus, the added bonus of the annuity being fully index linked (CPI).

Yeah, I get that it’s totally different from the APC route. 

If you’re suggesting I could use the whole AVC pot then that’s good to know that there’s no limit as such. That would answer my main question. 👍

I found a policy document that confirms the conversion rate by age. It would be good if my LGPS provider were able to surface that information if that is indeed what they are working to. 

https://pensions.gov.scot/sites/default/files/2020-11/LGPS_SAVCConversionToAddPensionGuidance.pdf

As a general principle, basically everything in respect to individual members rather than participating employers is set centrally. However, if you're not in Scotland, you need the factors for England and Wales set by GAD. You can't do better than the documentation administrators will use, which is here:

https://lgpsregs.org/schemeregs/actguidance.php

Open up 'AVCs - purchase of additional pension', the the latest factors spreadsheet. As I write this, you'll then want tab x-806.

seans_elysees

hyubh said:

seans_elysees said:

Silvertabby said:

seans_elysees said:

Silvertabby said:

seans_elysees said:

I’m in LGPS and also contribute a decent amount to AVC. I understand that I can take the AVC 100% tax free if I take it at the same time as LGPS as long as:

1) It doesn’t make up more than 25% of combined LGPS+AVC value. 

2) Limited to £268k max. ? 

My question is about the £268k limit. Is that a tax free limit that is assigned to me as an individual for all my pensions combined? 

I have other SIPPs that would normally qualify for 25% tax free on draw down. Would each draw down from those consume part of the £268k limit before I got to start taking LGPS AVC lump sum? 

Yes, that's your limit across all pensions.  Each pension provider, including the LGPS, will ask you for details of your other pensions so they don't bust the tax free limit. 

If your LGPS AVC does exceed the (total) limit, then you could use the excess to buy additional fully index linked LGPS benefits.

Thanks. 👍 

I’m really struggling to get any info from my LGPS provider about the process for buying that additional LGPS pension in that scenario. I appreciate that it would be a hypothetical as things may well change before then, but I’d like to know the conversion rate, and whether there’s a limit on how much can be converted. (I know, for example that APCs have a £8,030 max. in terms of how much additional benefit can be purchased). 

APCs and buying extra benefits from AVCs are two quite different things.  In theory, you could use all of your AVC fund to buy additional pension - the £8,030 max only applies to APCs.

Strictly speaking, when you use AVCs to buy additional benefits, you are buying a LGPS annuity.  But LGPS administrators don't tend to use the word 'annuity' because it confuses  some people!  Like any other annuity, the factors are age related.  ie, £10K at age 66 will buy a higher 'annuity' than at age 55.  On the other hand, you have the choice of buying additional survivor's benefits in return for a modest reduction to your own benefits.  Plus, the added bonus of the annuity being fully index linked (CPI).

Yeah, I get that it’s totally different from the APC route. 

If you’re suggesting I could use the whole AVC pot then that’s good to know that there’s no limit as such. That would answer my main question. 👍

I found a policy document that confirms the conversion rate by age. It would be good if my LGPS provider were able to surface that information if that is indeed what they are working to. 

https://pensions.gov.scot/sites/default/files/2020-11/LGPS_SAVCConversionToAddPensionGuidance.pdf

As a general principle, basically everything in respect to individual members rather than participating employers is set centrally. However, if you're not in Scotland, you need the factors for England and Wales set by GAD. You can't do better than the documentation administrators will use, which is here:

https://lgpsregs.org/schemeregs/actguidance.php

Open up 'AVCs - purchase of additional pension', the the latest factors spreadsheet. As I write this, you'll then want tab x-806.

This is great, thanks for pointing me to that. 

I’ve found the equivalent document for Scotland with a quick Google. 

Random47

Silvertabby said:

seans_elysees said:

I’m in LGPS and also contribute a decent amount to AVC. I understand that I can take the AVC 100% tax free if I take it at the same time as LGPS as long as:

1) It doesn’t make up more than 25% of combined LGPS+AVC value. 

2) Limited to £268k max. ? 

 

Yes, that's your limit across all pensions.  Each pension provider, including the LGPS, will ask you for details of your other pensions so they don't bust the tax free limit. 

If your LGPS AVC does exceed the (total) limit, then you could use the excess to buy additional fully index linked LGPS benefits.

Slight thread hijack:

What if you have had previous small pot payments. For example accessed 3 x £10K small pots in previous years. All of which have had the 25% tax free benefit applied. Does your tax free maximum of £268K reduce by a relative amount?