LGPS AVC 25% TFLS calculation

seans_elysees

Hi, 


A couple of questions if anyone can help: 

1) 

I’m wondering if there’s a set calculation/multiplier for the overall value of the LGPS DB pot? Or does it value from scheme to scheme? 

2) 

Secondly, I (42m) am heavily contributing to AVC’s at the moment but plan to scale back in a few years. If all goes to plan, my AVC pot - if I can leave it until 68 when taking LGPS - would potentially be well in excess of 25% of my overall plan (LGPS + AVC) combined value. 

I understand there’s the option to buy additional pension/annuity at that stage and I have the current calculation guidance for that.  

What I’m trying to get my head around is how I would determine how much I could take as the TFLS. Further complicated possibly by the fact I would have been drawing other DC private pensions between 55-68. I assume those would have been attracting 25% tax free draw downs, thereby consuming part of my my LSA and have pretty much had that confirmed previously on here. 

Would it basically mean that the tax free value of those DC draw downs from 55-68 would be deducted from my LSA of £268k when calculating what value I could take tax free from the AVC pot? (And then convert the remainder to additional pension annuity) 



Thanks in advance for any guidance. I am ultimately trying to work out when to dial back my AVC contributions, as I am heavily front-loading these just now. 

DRS1

Can you explain question 1?

I am sure you will have seen mention on here that there is no such thing as a DB Pot.

daveyjp

There is no pot with a DB.  To calculate the maximum tax free lump sum including AVC there is a formula which capitalises the DB annual income.

There are calculators here:

https://www.lgpsmember.org/help-and-support/tools-and-calculators/maximum-avc-lump-sum-calculator/

seans_elysees

DRS1 said:

Can you explain question 1?

I am sure you will have seen mention on here that there is no such thing as a DB Pot.

daveyjp said:

There is no pot with a DB.  To calculate the maximum tax free lump sum including AVC there is a formula which capitalises the DB annual income.

There are calculators here:

https://www.lgpsmember.org/help-and-support/tools-and-calculators/maximum-avc-lump-sum-calculator/

Thanks both. Im just using wrong terminology. I’m basically wanting to know what multiplier to the accrued DB annual value is applied in calculations. 

The calculator in 2nd response is helpful in providing the workings for that answer. It’s 20x. 

Thanks 

Aylesbury_Duck

Jumping onto this thread, I have a question.

As I understand it, the maximum TFLS I can take from my AVC is 25% of the combined value of the notional LGPS value (20x today's value) plus the AVC value.   Is that correct?  I know there's an absolute upper limit, but I'm not near that.

In my case, as at now, my LGPS entitlement is £13,208 and my AVC is worth £166,614.  By my calculations, that would make the maximum TFLS  ((£13,208 x 20) + £166,614)) / 4 = £107,694

However, when I use the calculator tool, it generates a sum of £88,053.   Can someone explain the substantial difference, please?  There's no LGPS lump sum involved.

Silvertabby

Aylesbury_Duck said:

Jumping onto this thread, I have a question.

As I understand it, the maximum TFLS I can take from my AVC is 25% of the combined value of the notional LGPS value (20x today's value) plus the AVC value.   Is that correct?  I know there's an absolute upper limit, but I'm not near that.

In my case, as at now, my LGPS entitlement is £13,208 and my AVC is worth £166,614.  By my calculations, that would make the maximum TFLS  ((£13,208 x 20) + £166,614)) / 4 = £107,694

However, when I use the calculator tool, it generates a sum of £88,053.   Can someone explain the substantial difference, please?  There's no LGPS lump sum involved.

I agree with your figures.  Most likely answer is a gremlin in the calculator.  Are you close enough to retirement to request an actual quote, including options for your residual AVC ?

Aylesbury_Duck

Silvertabby said:

Aylesbury_Duck said:

Jumping onto this thread, I have a question.

As I understand it, the maximum TFLS I can take from my AVC is 25% of the combined value of the notional LGPS value (20x today's value) plus the AVC value.   Is that correct?  I know there's an absolute upper limit, but I'm not near that.

In my case, as at now, my LGPS entitlement is £13,208 and my AVC is worth £166,614.  By my calculations, that would make the maximum TFLS  ((£13,208 x 20) + £166,614)) / 4 = £107,694

However, when I use the calculator tool, it generates a sum of £88,053.   Can someone explain the substantial difference, please?  There's no LGPS lump sum involved.

I agree with your figures.  Most likely answer is a gremlin in the calculator.  Are you close enough to retirement to request an actual quote, including options for your residual AVC ?

Thank you, at least I know I've interpreted the guidance correctly.

I'm several years away from possible retirement, and more than 10 years away from touching the LGPS.  The plan as things stand is to begin drawing the LGPS a little earlier than 67 and use the residual AVC to top up the otherwise reduced annual pension.  

collins74

Aylesbury_Duck said:

Silvertabby said:

Aylesbury_Duck said:

Jumping onto this thread, I have a question.

As I understand it, the maximum TFLS I can take from my AVC is 25% of the combined value of the notional LGPS value (20x today's value) plus the AVC value.   Is that correct?  I know there's an absolute upper limit, but I'm not near that.

In my case, as at now, my LGPS entitlement is £13,208 and my AVC is worth £166,614.  By my calculations, that would make the maximum TFLS  ((£13,208 x 20) + £166,614)) / 4 = £107,694

However, when I use the calculator tool, it generates a sum of £88,053.   Can someone explain the substantial difference, please?  There's no LGPS lump sum involved.

I agree with your figures.  Most likely answer is a gremlin in the calculator.  Are you close enough to retirement to request an actual quote, including options for your residual AVC ?

Thank you, at least I know I've interpreted the guidance correctly.

I'm several years away from possible retirement, and more than 10 years away from touching the LGPS.  The plan as things stand is to begin drawing the LGPS a little earlier than 67 and use the residual AVC to top up the otherwise reduced annual pension.  

I think this calculator doesn’t factor in the AVC as part of the calc so that’s why it’s lower.

Try this one that does allow you to enter the AVC 

https://www.lgpsmember.org/help-and-support/tools-and-calculators/lump-sum-calculator/

Aylesbury_Duck

collins74 said:

Aylesbury_Duck said:

Silvertabby said:

Aylesbury_Duck said:

Jumping onto this thread, I have a question.

As I understand it, the maximum TFLS I can take from my AVC is 25% of the combined value of the notional LGPS value (20x today's value) plus the AVC value.   Is that correct?  I know there's an absolute upper limit, but I'm not near that.

In my case, as at now, my LGPS entitlement is £13,208 and my AVC is worth £166,614.  By my calculations, that would make the maximum TFLS  ((£13,208 x 20) + £166,614)) / 4 = £107,694

However, when I use the calculator tool, it generates a sum of £88,053.   Can someone explain the substantial difference, please?  There's no LGPS lump sum involved.

I agree with your figures.  Most likely answer is a gremlin in the calculator.  Are you close enough to retirement to request an actual quote, including options for your residual AVC ?

Thank you, at least I know I've interpreted the guidance correctly.

I'm several years away from possible retirement, and more than 10 years away from touching the LGPS.  The plan as things stand is to begin drawing the LGPS a little earlier than 67 and use the residual AVC to top up the otherwise reduced annual pension.  

I think this calculator doesn’t factor in the AVC as part of the calc so that’s why it’s lower.

Try this one that does allow you to enter the AVC 

https://www.lgpsmember.org/help-and-support/tools-and-calculators/lump-sum-calculator/

Thanks!  That one produces a result in line with my own calculation.

Edited to Add:  It says NEW next to the list of calculators, so it must have been added since I last ran the calculation.  Either that, or I missed it!

Larry_M

I'm now a bit confused by all this. In my previous reading up on this topic I'd seen a divisor of 3 used rather than 4 (this must be what the OP's first calculator had used), but also a factor of 16 rather than 20. I think this is the first time I've seen a divisor of 4 used.

I hadn't seen this new calculator either so can we consider this the definitive one? Where had the factor of 16 come from?

Silvertabby

Some LGPSs are using a more convoluted maximum lump sum calculation, which does result in a slightly lower lump sum.

But, for your own pre-retirement checks, the old divisor of 4 of the total of 20 X annual pension plus 1 X any automatic lump sum plus 1 X AVC is close enough.