Using claimed LGPS pension to pay in to new SIPP

Silvertabby

TerryBiscuits said:

Silvertabby said:

As a rule of thumb, LGPS APCs are good value if you don't intend to draw your pension until SPA (or near enough).  Perhaps not such a good deal if you take them early, as the amount of  APC you have bought will be reduced for early payment in much the same way as main scheme benefits.

AVCs are more flexible, in that you may be able to take the whole lot as tax free cash (within HMRC limits) or use some or all of your AVCs to buy additional LGPS index linked benefits.  Early retirement factors still apply, just in a different way  -  the amount you have saved in your AVCs wouldn't be reduced for early payment, but the factors used in determining the amount of additional pension you buy will be age related.  

My current plan is to try and live off my pension from the previous employer, plus a small amount of my current salary. If I retire in five years when I'm 65, I think the most I could pay in to get the tax free AVC sum is around £60k. That should leave me enough to put around £12k pa alongside that into APCs or a SIPP. 

If I went down the APC route, I would get around £3.5k extra pension at 65. I haven't looked into a SIPP yet, but assuming 40% tax relief and 5% interest pa, I'd end up with a pot of around £97.5k in five years. Using the 4% drawdown rule, that would give me £3.9k pa. The SIPP could also be inherited, whereas the extra APC pension dies with me.

Have I got that right? Or am I barking completely up the wrong tree? 

NRA for your APC will be 67, so reductions for just a couple of years early payment won't be horrendous.

Yes, the APC would die with you - but if widow's benefits are an issue, LGPS benefits bought with all or part of your AVC can be either with or without survivor's benefits.  If you opt for 'with', your own additional pension will be slightly less. 

But SIPPs aren't my forte, I'm afraid, so I'll leave that part of your question for one of the private pension gurus on these boards.

Albermarle

 I'm nearly 60 and about to start receiving an LGPS pension from a previous job I was made redundant from.

If you get a tax free lump sum when you start this pension, then there are restrictions on recycling this back into a pension ( to effectively get double tax relief) . I am pretty sure this also applies to DB schemes, not just DC schemes.
The rules are quite complicated but it depends a lot on the size of the lump sum, and any increases in contributions around the same time ( simplified explanation).
 Also it seems that HMRC are not that interested, if it is not too blatant.

TerryBiscuits

Albermarle said:

 I'm nearly 60 and about to start receiving an LGPS pension from a previous job I was made redundant from.

If you get a tax free lump sum when you start this pension, then there are restrictions on recycling this back into a pension ( to effectively get double tax relief) . I am pretty sure this also applies to DB schemes, not just DC schemes.
The rules are quite complicated but it depends a lot on the size of the lump sum, and any increases in contributions around the same time ( simplified explanation).
 Also it seems that HMRC are not that interested, if it is not too blatant.

Thanks. In case any eagle-eyed HMRC staff are reading this, I will only be putting money into my AVCs and APCs/SIPP from my salary - the TFLS will be going into an ISA and paying for a wedding!