LGPS help with AVCs and APCs

manda1205

My husband is 53 and currently looking into how early he could retire. Ideally 58.

He has an LGPS pension, currently worth £14,800 a year, if he were to retire today. This is projected to be £25,500 if he carries on as he is working and contributing in his current role and retires at 67.

He has savings of over £150,000, mostly in an ISA and premium bonds. We are mortgage free and I also own another house which I rent out, which is classed as my earnings.

Could anyone advise on whether he is better to pay more into his pension pot (he could afford to double his payment, possibly more, or pay lump sum from savings every year if better)? Should he pay AVC or APCs (we're not sure of the difference)?

Or should he do something entirely different?

Also does anyone understand what happened to LGPS pensions from 2011? He started at council in 2003 and brought a pension from aviva with him, yet on the pension statement it always says he started the role in 2011. Is his previous pension missing, did something happen in 2011 and its counted separately?

Thanks for any help.

xylophone

https://www.lgcplus.com/archive/timeline-for-pension-reforms-21-07-2011/

From Google AI which may be helpful

AVC (Additional Voluntary Contributions)	APC (Additional Pension Contributions)
What it is	A separate, defined contribution (DC) investment pot.	Buying a fixed, guaranteed yearly amount of LGPS pension.
How it grows	Invested in funds managed by an in-house provider (e.g., Prudential, Scottish Widows); value fluctuates with the market.	Increases automatically with the cost of living (inflation-linked); value is guaranteed.
Eligibility	Open to members in the main section or the 50/50 section of the LGPS.	Only open to members in the main section of the LGPS (not available in 50/50).
Contribution limits	Up to 100% of your pensionable pay.	Capped at a yearly scheme maximum (e.g., up to £9,054 extra pension per year).
Death and survivor benefits	Includes an investment pot/survivor benefits that can be passed to beneficiaries.	Generally no extra dependent/survivor pension attached beyond standard scheme rules.
Tax & National Insurance	Paid before tax; many employers offer Salary Sacrifice (saving National Insurance too).	Receives income tax relief, but no National Insurance savings via salary sacrifice.
Taking the money	Flexible options: convert to an annuity, take tax-free cash (up to 25%), or draw cash lump sums.	Added directly to your regular, guaranteed LGPS pension payout

From LGPS

https://www.lgpsmember.org/your-pension/paying-in/paying-more/

https://www.lgpsmember.org/help-and-support/tools-and-calculators/buy-extra-pension-calculator/

daveyjp

If his employer offers AVCs through salary sacrifice the following gives background around shared cost AVCs.

https://www.mymoneymatters.com/employees

Contributing the maximum to AVCs through salary sacrifice may be beneficial. He still needs to earn minimum wage but he can use other savings to live off. There was a change to pensions in 2008 with the move to career average. If there appears to be a discrepancy in his employment start date and pension start date he needs to contact the pension provider to understand why.

The salary sacrifice rules are changing in 2029 so he needs to be on the ball if this is an approach he can take.

Aylesbury_Duck

I'd echo the above post, and suggest he considers AVCs. LGPS-linked AVCs carry a particular advantage that allows you to draw up to 100% of the AVC tax free if taken at the same time you begin drawing the LGPS, capped at 25% of the total value of LGPS plus AVC. Bear in mind that retiring at 58 would see a hefty reduction in the LGPS, to reflect that fact it's being taken early. I think the reduction is about 5% per year taken early, so if his LGPS was worth, say £17,000 at 58, that would be reduced to something like £9,000 (all very approximate, but you can see the rough impact).

Albermarle

https://forums.moneysavingexpert.com/discussion/6688157/lgps-help-with-avcs-and-apcs

When looking to retire, early or otherwise, your pension and other savings/income are only part of the story.

You need to have a good idea of your current and planned expenditure. Some couple can live happily on £25K pa, whilst for others it would need to be a lot more.

Silvertabby

https://forums.moneysavingexpert.com/discussion/6688157/lgps-help-with-avcs-and-apcs

Did he change jobs, perhaps to a lower paid post in 2011? If not, then that needs checking.

As for APCs versus AVCs.....

APCs are good value if you intend taking your benefits from normal retirement age. Perhaps not so much if you go 10 years early, due to the early retirement reductions (especially as they don't have any R85 protections).

AVCs are usually taken for the double tax benefits - tax relief in, tax free (within HMRC limits out) but they can also be used to buy index linked LGPS benefits. Again, the factors used in the conversion are age related, so the earlier you retire the less pension your AVC pot will buy.

Is 58 set in concrete? If not, going at 60 would be more beneficial as that is when the pre 2008 service R85 protections really kick in.