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  • FIRST POST
    • Jimbouk
    • By Jimbouk 16th Oct 19, 2:49 PM
    • 12Posts
    • 2Thanks
    Jimbouk
    LGPS Prudential AVC through Wise
    • #1
    • 16th Oct 19, 2:49 PM
    LGPS Prudential AVC through Wise 16th Oct 19 at 2:49 PM
    My wife has recently been given the option to purchase AVCs via salary sacrifice via the her LGPS pension scheme and a company called AVC wise and the Prudential

    In basic terms if 500 per month is sacrificed from her salary in around 625 will hit the account , so over the three years she has left until she is 55 this could end up as a tidy tax free sum on retirement. We understand the tax free implications against her main pot .

    We have been looking in to it a little and to be honest it looks ideal for our short term goals.

    The only real are a of concern for us is what fund to choose with the default fund been the Pru with profits fund.
    Ideally i think we would go for mid level risk but we are unsure which would be the best fund from those available

    Medium Risk
    • Aberdeen Life Multi Asset Fund
    • Prudential Discretionary Fund
    • Prudential Dynamic Growth IV
    • Prudential Index-Linked Fund
    • Prudential Long Term Bond Fund
    • Prudential Long-Term Gilt Passive Fund
    • Prudential UK Property Fund
    Lower to medium risk
    • Prudential All Stocks Corporate Bond Fund
    • Prudential Dynamic Growth Il
    • Prudential Fixed Interest Fund
    • Prudential With-Profits Fund


    We would be interested to hear if any of you have experience of this or other similar schemes or the funds
    Your advice as always would be greatly received

    Thanks in advance
Page 1
    • Durban
    • By Durban 16th Oct 19, 2:57 PM
    • 222 Posts
    • 387 Thanks
    Durban
    • #2
    • 16th Oct 19, 2:57 PM
    • #2
    • 16th Oct 19, 2:57 PM
    Have you looked at the reduction in the LGPS pension by going early at 55?

    If she does only have 3 years , it's best to have them in the lowest risk possible.

    I have AVC's with Prudential but as I am still over 12 years away from retiring , I have them in 3 high risk funds but will lower the risk as I get closer to retirement.

    LGPS AVC's are an excellent , tax efficient way to build up a lump sum.
    Tax free on the way in and tax free on the way out.

    Your wife is even luckier having the salary sacrifice option as my one doesn't.
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    • Jimbouk
    • By Jimbouk 16th Oct 19, 3:04 PM
    • 12 Posts
    • 2 Thanks
    Jimbouk
    • #3
    • 16th Oct 19, 3:04 PM
    • #3
    • 16th Oct 19, 3:04 PM
    Thanks for the reply.

    Retirement @ 55 may or may not happen and she is fully aware of the reductions , ideal situation with the way things are at the moment would be VR or redundancy @ 55 but i suppose that is just a pipe dream at the moment.
    The Salary sacrifice seems a no brainer and im even thinking about contributing to it myself by giving her the cash each month.
    • OldBeanz
    • By OldBeanz 16th Oct 19, 8:48 PM
    • 867 Posts
    • 676 Thanks
    OldBeanz
    • #4
    • 16th Oct 19, 8:48 PM
    • #4
    • 16th Oct 19, 8:48 PM
    3 years means lowest risk. Cash would still give you a healthy profit.
    • cloud_dog
    • By cloud_dog 16th Oct 19, 8:58 PM
    • 4,618 Posts
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    cloud_dog
    • #5
    • 16th Oct 19, 8:58 PM
    • #5
    • 16th Oct 19, 8:58 PM
    Thanks for the reply.

    Retirement @ 55 may or may not happen and she is fully aware of the reductions , ideal situation with the way things are at the moment would be VR or redundancy @ 55 but i suppose that is just a pipe dream at the moment.
    The Salary sacrifice seems a no brainer and im even thinking about contributing to it myself by giving her the cash each month.
    Originally posted by Jimbouk
    Based on the numbers you have provided we are not talking about Salary Sacrifice here, merely standard basic rate tax relief on pension contributions.
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • Jimbouk
    • By Jimbouk 16th Oct 19, 10:05 PM
    • 12 Posts
    • 2 Thanks
    Jimbouk
    • #6
    • 16th Oct 19, 10:05 PM
    • #6
    • 16th Oct 19, 10:05 PM
    It's definitely salary sacrifice, these are purely a guesstimate as to the amount we would have to stipulate to be deducted from the salary.
    My wife earns around 32k so is a basic rate taxpayer and she wants to see a 500 per month reduction in her take home pay, possibly rising to 750 if I contribute .
    Any advice to more accurate figures would be appreciated.
    • Jimbouk
    • By Jimbouk 16th Oct 19, 10:08 PM
    • 12 Posts
    • 2 Thanks
    Jimbouk
    • #7
    • 16th Oct 19, 10:08 PM
    • #7
    • 16th Oct 19, 10:08 PM
    As stated I'm my initial post the company running the scheme is avcwise
    • daveyjp
    • By daveyjp 16th Oct 19, 10:22 PM
    • 8,439 Posts
    • 7,064 Thanks
    daveyjp
    • #8
    • 16th Oct 19, 10:22 PM
    • #8
    • 16th Oct 19, 10:22 PM
    Avcwise is the salary sacrifice provider for LGPS Prudential AVCs only.

    If you are investing in AVCs anyway it really is a no brainer.

    The avcwise website has a calculator. On a 32k salary and 750 contribution you would pay 89.88 less a month in NI contributions. You can choose to invest this NI saving into the AVC which increases the contribution to 881 and you then save 105 NI a month.
    • cloud_dog
    • By cloud_dog 17th Oct 19, 9:50 AM
    • 4,618 Posts
    • 2,893 Thanks
    cloud_dog
    • #9
    • 17th Oct 19, 9:50 AM
    • #9
    • 17th Oct 19, 9:50 AM
    It's definitely salary sacrifice, these are purely a guesstimate as to the amount we would have to stipulate to be deducted from the salary.
    My wife earns around 32k so is a basic rate taxpayer and she wants to see a 500 per month reduction in her take home pay, possibly rising to 750 if I contribute .
    Any advice to more accurate figures would be appreciated.
    Originally posted by Jimbouk
    As a BRT payer your wife will save an additional 12% of NI based on the AVC contribution.

    In essence if you calculate 68% (20% TR and 12% NI) of the amount you wish to contribute, that is the reduction in take home pay.
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • Jimbouk
    • By Jimbouk 17th Oct 19, 12:13 PM
    • 12 Posts
    • 2 Thanks
    Jimbouk
    As a BRT payer your wife will save an additional 12% of NI based on the AVC contribution.

    In essence if you calculate 68% (20% TR and 12% NI) of the amount you wish to contribute, that is the reduction in take home pay.
    Originally posted by cloud_dog

    Thanks again
    So in basic terms if we stipulate 1320 per month investment it should make a 1000 difference in monthly take home pay
    • cloud_dog
    • By cloud_dog 17th Oct 19, 12:59 PM
    • 4,618 Posts
    • 2,893 Thanks
    cloud_dog
    1320 contribution will reduce the take home by 897.60.

    If you want a reduction of 1000 in take home pay then:
    1000 / 68 - 68 is the reduction based on 20% TR and 12%NI
    Multiply result by 100
    = 1470.59
    Percentages are all about what percentage are ou calculating, i.e. a percentage from 1000 or a percentage of 1320 etc.
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • Sobraon
    • By Sobraon 17th Oct 19, 2:26 PM
    • 315 Posts
    • 175 Thanks
    Sobraon
    The performance of PRU AVC is not great (IMHO). If you contact the relevant PRU dept ( sometimes a little difficult but can be done) and request the exact ISIN numbers for the fund(s) in your particular 'flavour' of LGPS you can back track performance by using a free account at the FT.com. Use portfolio service and set up a watchlist (may need to register for a free account).

    The performance of Pru 3 Global Equity Pen was 2.43% (1yr trailing Total Return) and 7.93% (5yr TTR)* and the better Pru 3 International Equity Pen 4.42% and 10.92%.

    For reference a 'bog standard' global tracker (HSBC MSCI World UCITS ETF) produced 6.86% and 12.47%.

    As is common with pension companies getting to the bottom of the charges is a nightmare. Both the PRU funds mentioned above are 'funds of funds' (constituents include M&G funds) so at all layers there will be charges. Additionally the Pru pension will also charge , so what the total fees are is a figure completely impenetrable to this bear of very little brain.

    As always DYOR/YMMV and this is just my understanding!


    * the multi year TTR are I believe annualised but good luck with finding this on FT.com
    • Jimbouk
    • By Jimbouk 17th Oct 19, 3:23 PM
    • 12 Posts
    • 2 Thanks
    Jimbouk
    Thanks for all the replies , some fantastic info there .
    Just had it confirmed from AVC wise that the figure is appx 1472 for a 1000 deduction in take home pay , thanks cloud _dog

    We are aware that the pru's funds are not the best performers , but the money paid in to the pot will more than compensate for that .Have my FA on the case with regards to this

    Cheers
    • daveyjp
    • By daveyjp 17th Oct 19, 6:22 PM
    • 8,439 Posts
    • 7,064 Thanks
    daveyjp
    Thanks for all the replies , some fantastic info there .
    Just had it confirmed from AVC wise that the figure is appx 1472 for a 1000 deduction in take home pay , thanks cloud _dog

    We are aware that the pru's funds are not the best performers , but the money paid in to the pot will more than compensate for that .Have my FA on the case with regards to this

    Cheers
    Originally posted by Jimbouk
    Exactly. If Pru grows by 0% you have had 12% "return" from NI contribution.
    • wrexy33
    • By wrexy33 21st Oct 19, 2:31 PM
    • 47 Posts
    • 13 Thanks
    wrexy33
    Just completing my paperwork to start paying AVC's via a salary sacrifice scheme. I'd be grateful to know if I have the amount of salary to be sacrificed correct as I believe if I sacrifice too much then I could be loosing out.



    I Take home 1700 per month - I am asking for 630 to be salary sacrificed every month. Looking to do this for 2 years into the prudential deposit fund.


    Also, are there any issues with salary sacrifice and SSP (sick pay).


    Many Thanks
    • Jimbouk
    • By Jimbouk 14th Nov 19, 10:21 AM
    • 12 Posts
    • 2 Thanks
    Jimbouk
    Thanks for all the input its now all set up and in place .

    As expected die to onlly three years until retirement my FA advised to use it as a money accumulation pot and should be in a fund with as little risk as possible . He advised that the pru cash fund which purchases units in the M&G PP Cash Fund M&G PP would be his recomendation.

    One thing to watch out for when applying for this type of avc is to make sure your investment amount doesnt take your remaining salary under the national minimum wage .
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