Two LGPS pensions and one aligned to AVCs

sg1000

Hi All,

Looking for some views. Current situation is that I have two Scottish LGPS pensions that are currently active. First one is part time that started in 2007 that would pay £12,000 ish, yearly, if taken today, with lump sum of £3000. I plan to leave this employment in the next two months and so it will become deferred.

Second one is with the same LGPS pension scheme and working on a full time basis, started in 1994 and has value of £23,000, yearly, if I retired today, with a lump sum of £41,000.

I am currently a few months from reaching my 59th birthday.

I also have AVCs attached to the second pension (1994) that amount to £164,000 and continue to pay in £1000 ish a month.

My question is, when leaving my current part time job, should I take the pension and pay the equivalent into the AVCs as well as my current contributions (I would pay from salary and use the £12,000 pension to supplement current salary minus additional AVC payments to my full time pension), or should I just leave "as is". Projected pension for the post I am about to leave is £13,000 at my preferred retirement age of 60. I aim to leave my full time post at 60 also, with projected pension of £24500 at that time

I realise that my current AVCs and lump sum from my 1994 pension will not allow me to take the whole AVC and lump sum as tax free cash and may consider buying additional pension with the extra, albeit at a reduced rate of extra pension, given I am buying it early.

I have limited other savings (£24,000 S&S ISA and £23,000 savings account). Remaining mortgage of £55,000 would be paid from whatever lump sum I take.

Any thoughts welcome,

SG

Aylesbury_Duck

My first thought is that with just over a year until you stop working, and given that you're already above the ceiling for taking 100% of the AVC tax free, should you consider ongoing monthly £1000 contributions going into a SIPP instead of the AVC? It would give you more accessible/flexible pot of money (as opposed to having to spend the excess on more LGPS entitlement), particularly since that excess would otherwise buy reduced LGPS entitlement as you say.

I'm younger than you but I have done this because I realised my AVC was becoming "overcooked". I contribute to a SIPP now, alongside my LGPS deductions, so that over the 14 or so years I have until I draw my LGPS, the AVC TFLS excess will have reduced (if it doesn't, it will be because of excellent continual growth, which would be a welcome problem!) and I'll have SIPP money I can use as I want and when I can and want to.

sg1000

Thanks, Aylesbury,

I appreciate the response. Hadn't thought of the SIPP route, as currently don't have to apply for the extra tax relief from HMRC with the AVC payments (currently 45% tax payer in Scotland, but the current AVCs bring that down a bit).

I suppose that I was thinking if I didn't choose to buy additional LGPS Pension, I could just transfer the part of the AVC that can't be taken as tax free from Prudential to another SIPP provider when I eventually make the decision to retire.

Thanks again for the suggestion,

SG

Aylesbury_Duck

Can you do that? It's been a while since I looked but I seem to remember it's not possible. Hopefully I'm wrong, because I would like to have the option. My current plan is to buy additional LGPS because I've got sufficient SIPPs and ISAs to meet my needs between retirement and 67, and then state pension kicks in. That plus boosted LGPS is all I would need for my income requirements after 67.

sg1000

According to Prudential's FAQ, yes, you can do that. If not, I'll just keep the surplus in there.