LGPS AVC STRATEGY

Maria2512

Hi,

Do you have to take your full AVC lump sum when you retire or can you leave it invested and live off other savings/LGPS pension for a year or 2?

With a 100k AVC, can I take a 40k tax free lump sum and max out 2 ISA's? If so, what happens to the 60k balance can i take that tax free whenever i want? or does it have to be different tax years?

I am trying to think of a strategy to avoid paying the taxman!!

Thanks 

NoMore

As ever the aim should be to provide the income you require as tax efficiently as possible, not necessarily avoiding paying tax altogether.

Maria2512

@NoMore Thanks, with so many scenarios, I am trying to cover all bets

Silvertabby

The option to leave your LGPS AVCs deferred ended in 2014.  Assuming you were/are a contributing member after 1 April 2014, you must now take your AVCs at the same time as your main scheme benefits.

In theory, you could transfer your AVCs to a private pension, but then you would be giving up one of the main benefits of in-house AVCs.  ie, taking 100% tax free (subject to HMRC limits).

Maria2512

@SilvertabbyThanks ST, back to the drawing board! I’m trying to find the best 5 year strategy for my AVC lump sum. I haven’t got an immediate use for it as I will be receiving redundancy pay and my LGPS pension. Just trying to bridge a gap for 5ish years

Maria2512

I’m thinking if I take the lump sum tax free, I will have to shelter the amount, or the tax savings on the way in will be taken on the way out, if I get my strategy wrong

Aylesbury_Duck

My plan is to take the maximum TFLS when I begin taking my LGPS, using the excess to purchase more LGPS pension.  Between my wife and I, we could shelter £140k in ISAs and premium bonds if we manage things correctly.  

Are you worrying unnecessarily about tax here?  The main benefit of the LGPS AVC scheme is the 100% TFLS (up to 25% of the total value of the LGPS plus AVC pot and no more than the HMRC limit).  Presumably that outweighs any modest taxation you may face on any part of it you can't shelter in ISAs and PBs?

Maria2512

@Aylesbury_Duck  Maybe I am overthinking thinking the tax side of things too much. Isa’s and premium bonds sounds like good options

SarahB16

Aylesbury_Duck said:

Are you worrying unnecessarily about tax here?  

I think she might be.  

SarahB16

Maria2512 said:

@Aylesbury_Duck  Maybe I am overthinking thinking the tax side of things too much. Isa’s and premium bonds sounds like good options

... and savings accounts too but just stay below the threshold on which you pay tax on your savings interest.  

You could even put some in a current account to cover you for the first c.3-6 months too.  

Then just draw down the money as you need it. 

Perhaps not relevant to you but some other people use this AVC tax free amount to pay off their mortgage.  

Aylesbury_Duck

And presumably if you really wanted to, you could take the AVC and LGPS towards the end of one tax year, dump up to £70k of the TFLS into ISAs and PBs immediately and then another £70k on 6th April.