Paying into LGPS, considering AVCs but not sure

swanny65 · 15 August 2018 at 10:45AM

Hi

I joined the Civil Service AVC scheme about 20 years ago, having previously been sold a Free Standing AVC policy by an IFA in 1990 that perhaps hasn't the best advice (long story covered on here years ago).

I only pay £50 a month to Standard Life but my fund is currently worth around £43K. I make my own investment choices, Standard Life have a pretty good selection, and review every couple of years.

I want to retire in 7 years time at 60 so for me it has been a great decision. I would recommend you do the same but i am not a fan of the Pru.

Off topic but a question for blue eyes: Do the same AVC provisions apply to my AVC? i.e. will I be able to take my AVC pot in full as a lump sum. I can see my retirement coach-build motorhome becoming an A Class

johnnyboy63 · 15 August 2018 at 11:09AM

Remember if you want to invest £100 per month it will actually only cost you £80 through your wages

swindiff · 15 August 2018 at 11:21AM

Only £68, if they offer Salary Sacrifice

blue_eyes · 15 August 2018 at 11:26AM

Off topic but a question for blue eyes: Do the same AVC provisions apply to my AVC? i.e. will I be able to take my AVC pot in full as a lump sum. I can see my retirement coach-build motorhome becoming an A Class

I suspect not, but someone better informed might be able to help.
There is an faq at:
https://www.civilservicepensionscheme.org.uk/members/civil-service-added-voluntary-contributions/the-civil-service-additional-voluntary-contribution-scheme-csavcs-faq/
If that's relevant to your AVC, then the specific answer on that page says only 25% tax free.

The LGPS and its associated in-house AVCs is regulated by specific acts of parliament, rather than defined by the scheme itself, which define these elements, as well as the 1:12 commutation rate for the lump sum, etc.

[My understanding is that there was a proposal in draft legislation in 2014 to restrict the tax-free status of the LGPS in house AVC pot to those opened after April 2014 to the 25% , but this was never passed into law.]

Spreadsheet_Addict · 15 August 2018 at 2:08PM

You're correct - it remains tax free if it isn't more than 25% of your nominal pension "pot" i,e. 20x your pension + the total AVC value. This applies even if you take your pension early, but you must take it at the same time as your LGPS pension. I've started mine at £100 a month and will ramp up the payments as kids leave university, mortgage is paid etc. Hopefully it'll be over £40k by the time I retire at 55.

Gin_and_Milk · 15 August 2018 at 4:36PM

Thanks for all your replies and sorry I couldn't post back earlier, but I was at work.
Retiring early is something I would like to do ideally, as my husband would be 80 when I reach 67, but realistically speaking I couldn't go any earlier than 65. OH told me I may as well stay on for the extra 2 years, especially as I work 4 days per week and that we should make the most of our long weekends whilst we're still able.

@Swanny65 - By all means tell me to mind my own business, but what is it about the Pru that you don't like? I always thought they had a good reputation?

I don't think my employer does offer a salary sacrifice scheme, but I will check. If my plan is to put £100 per month into an AVC, would my employer only take £80 then? I know I sound stupid, but there's a lot about this which I don't understand and the reading material I have is hard work! That said, the general consensus so far is that it's a pretty good idea to invest in this alongside my pension.
Thanks again
Gin

Triumph13 · 15 August 2018 at 4:58PM

Your employer will deduct £100 from your income, but that will cause your tax bill for the month to drop by £20 so the net impact is just an £80 reduction in your take home.

Gin_and_Milk · 15 August 2018 at 5:00PM

Triumph13 wrote: »

Your employer will deduct £100 from your income, but that will cause your tax bill for the month to drop by £20 so the net impact is just an £80 reduction in your take home.

Thanks - I think I might put £120 in instead :beer:

pandora205 · 15 August 2018 at 5:25PM

I contribute to LGPS + AVCs and as I approach retirement am really pleased I started doing this some years ago. If I knew how quickly it would accumulate, I'd have started even earlier (I think it was 2004 when I began). I am a higher rate tax payer, so calculate the amount necessary to take me out of this bracket and pay it into the AVCs, and more recently I've increased it even more to even reduce some of the 20% rate. It's amazing how it builds up over time.

With regard to investment risk Local Government AVC providers usually offer a range of funds, and recommend moving to 'cautious' (but anticipated lower return) options the closer you get to retirement, which makes sense.

In calculating the 25% tax free amount, don't forget to add in your lump sum for pre-2008 service as this counts too. As mentioned earlier the AVC lump has to be taken at the same time as your LGPS pension but there is no reduction for early retirement (at lease for taking AVCs early).

I'm not in the PRU scheme but a parallel one, but a colleague is and it appears to really transparent. One of the advantages with the PRU AVCs is that there is online access, so you can see how your funds are growing rather than waiting for annual statements.

Gin_and_Milk · 15 August 2018 at 6:29PM

pandora205 wrote: »

One of the advantages with the PRU AVCs is that there is online access, so you can see how your funds are growing rather than waiting for annual statements.

I must admit I did like the sound of being able to access my statement online. Over the years I do aim to increase my payments because as things stand, if I take the higher annual pension, the lump sum is tiny and it would be nice to have a bit of both!

Paying into LGPS, considering AVCs but not sure

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