LGPS AVC Annuity

Maria2512

Hi,

If I want to buy an Annuity with my AVC pot. Do I have to notify Pru? Or would it be done by the new provider? How does it work? Is it a long winded process?

thanks

hyubh

Maria2512 said:

Hi,

If I want to buy an Annuity with my AVC pot. Do I have to notify Pru? Or would it be done by the new provider? How does it work? Is it a long winded process?

thanks

Do you mean, an annuity like you might buy with a personal pension from the Pru, or additional LGPS pension...? (Both are possible.)

Maria2512

hyubh said:

Maria2512 said:

Hi,

If I want to buy an Annuity with my AVC pot. Do I have to notify Pru? Or would it be done by the new provider? How does it work? Is it a long winded process?

thanks

Do you mean, an annuity like you might buy with a personal pension from the Pru, or additional LGPS pension...? (Both are possible.)

It’s an AVC from the Pru alongside my pension. I’m looking at a fixed term annuity with the TFLS

SarahB16

I'm sure @Silvertabby will come along soon enough and is extremely knowledgeable on this subject however it is my understanding that you will get a far better 'annuity/additional pension' by going with the LGPS provider/Pru rather than using the AVC tax free cash lump sum and looking for an annuity in the market, i.e. far better to buy additional LGPS pension. 

daveyjp

As above.  What research have you done which advises an annuity with the Pru is better for you than extra LGPS pension?

Silvertabby

Most people take out AVCs for the double tax benefits - tax relief in, tax free (within HMRC limits) out.

But, yes, you can use some (usually the residual over the tax free limit) or all of your AVCs to buy an annuity either from the LGPS, the AVC provider, or on the open market.

Pru/open market annuity rates have improved in the last few years, LGPS factors perhaps not quite so much, but they benefit by being fully index linked.    But it's worth asking for a Pru quote for comparison.  Open market would be much more convoluted, especially if you don't already have a DC personal pension to transfer your AVC into.

If time is of the essence, however, than buying LGPS benefits (being the simplest option)  is by far the winner.

Another point if you will need your lump sum/pension to be paid as soon as possible after retirement - stop your AVC payments at least a month before your leaving date.  That will give the Pru time to register your last payment and disinvest your funds as soon as your LGPS  call for them.

ADD.  Just seen your comment re taking a fixed term annuity.  This isn't offered by the LGPS, so the Pru would be your only logical option.  That said, still worth comparing a Pru fixed term with a LGPS life annuity.   

Maria2512

Sorry, maybe I wasn’t clear

There are redundancies at my LA in March 26 which I will apply for. 

I have done my calculations based on research and asking questions on here, which has been great. 

Based on my calculations my annual LGPS is going to be aporox £21k per year (from March 26). Redundancy £25k and Pre08 Pension lump sum £14k. 

I also have an AVC pot which I transferred to cash and will be worth 100k next April. 

I don’t have a mortgage or any need for the cash now as the redundancy and pension lump sum will suffice. 

I am trying to work out what the best thing to do with the £100k AVC lump sum. I am leaning towards a 5 year fixed Annuity with no cash back at the end. So I will have guaranteed income for 5 years and will only have a 3 year gap till I reach State Pension age. I am not sure if this is the most tax efficient way but I am still researching and asking questions!!  

As my other half will also retire at the same time with no income or pension (NHS deferred). I will need to ‘earn’ a net of £3000- £3200 a month so we can have the same level of income as we have now combined. 

Thanks

Silvertabby

In view of your age (59?) and your pension accrual, the cost of making you redundant (specifically the employer's pension strain costs) will be .... considerable.

Has your HR indicated that voluntary redundancy would even be on the table for you?

Maria2512

Yes they have. There are 2 rounds of redundancies due, one in March which is council wide and the other is in May which is for my section. They said they want to avoid compulsory redundancies and are encouraging those who want to go to apply. Fingers crossed!

Aylesbury_Duck

Maria2512 said:

Yes they have. There are 2 rounds of redundancies due, one in March which is council wide and the other is in May which is for my section. They said they want to avoid compulsory redundancies and are encouraging those who want to go to apply. Fingers crossed!

Applying is one thing, being accepted is another.  My employer refused several voluntary requests in the latest round because the cost was too high.  The pension strain in some cases would have been enormous.

Maria2512

Fair enough. I suppose I’ll throw my hat in the ring and keep every crossed. It would be perfect timing for me