LGPS AVC’s

ashpan · 21 July 2018 at 10:39AM

I have recently had some great guidance on a question about retirement funding which has led me to ask the following question hoping there are some LGPS specialists out there
I am considering retirement this year, work pt in a school and a member of the LGPS for around 20 years, I can withdraw £22k from my SIPP and. wanted to know how this would work for me should I pay this in as additional £ to my LGPS, I have never made any additional payments before and I’ve been told that I should leave the £66k total value of my LGPS pension where it is for now. I have additional NHS pension income of £500 pcm and need around £1k pcm to live on. My state pension of around £800 pcm commences in exactly 6 years and I have a SIPP worth around £87k plus ISA £37k

Silvertabby · 21 July 2018 at 2:55PM

As you are considering retiring before your NRA (State pension age) whatever extra pension you bought with your £22K would be reduced for early payment.

ashpan · 21 July 2018 at 10:02PM

yes im considering retiring in the next 6 months, it would be tax free though, yes?
would this be classed as AVC's or something else?
thanks

Silvertabby · 21 July 2018 at 10:30PM

If you use this money to buy additional pension, then it will be taxable income. The only way it would be tax free would be if all of your LGPS pension - and any other income - is less than £11850 per year.

AVCs are something else.

Durban · 22 July 2018 at 1:52PM

As Silvertabby said , the AVC's and buying additional pension are completely different. Buying additional pension gives you more per month in your pension, which would be taxable , not a lump sum.

The AVC's are a separate pot that you pay into and still obtain tax relief on your contributions into it. You also have to take your AVC pot at the same time that you take your main LGPS pension. The AVC pot would be tax free when you withdraw it under the criteria of your other thread.

Is there a particular reason that you want to take the £22,000 from your SIPP rather than your savings?

You are also only allowed to put a certain amount of your annual salary into the AVC each year. I think that if it is opened now , you can put all your annual salary into it but you would have to check.

Check also the exit fees for taking out in short time, if there are any still. I think this has changed and there won't be any if you are opening now, but please check.

The LGPS AVC's are good as you are able to take the whole lot out as a tax free sum , not just 25%, as long as the AVC pot is 25% or under of your total pension, including the main LGPS and AVC's

Silvertabby · 22 July 2018 at 2:24PM

As Durban says - but if you start an in-house AVC fund now your AVC provider may also impose an early cash-out penalty.

In the case of the LGPS I worked for, AVCs were through the Pru - who imposed penalties if the fund was withdrawn within 5 years of starting payments.

ashpan · 23 July 2018 at 11:59AM

I think my SIPP is doing quite well so I may take from my savings, would you think that’s a better plan? I think I’ll look further into AVCs with the PRU as if I can do AVCs then use tax free without penalty that sounds a good idea

Silvertabby · 23 July 2018 at 9:52PM

ashpan wrote: »

I think my SIPP is doing quite well so I may take from my savings, would you think that’s a better plan? I think I’ll look further into AVCs with the PRU as if I can do AVCs then use tax free without penalty that sounds a good idea

You'll need to ask your LGPS which in-house AVC provider they use - it may not be the Pru.

AlanP_2 · 24 July 2018 at 12:41PM

If you are retiring this year any of the LGPS AVC providers may well charge if you cash out pretty quickly, you would need to ask your LGPS provider for details on who they use and ask for the information booklet.

Total pension contributions will be limited to your annual "relevant earnings", which for most people is their salary. You need to deduct what you are currently paying into the main LGPS scheme to get to your "net figure" that could be paid into the AVC.

To pay a lump sum in would bypass payroll so it may not be possible, again you would need to check with whoever provides it to your LGPS.

Final point - don't take it out of the SIPP. As soon as you take a penny in taxable income out you are limited to paying £4K or £10k per annum into another DC scheme. The limit was £10k but is dropping down to £4k, or it might have done so by now.

bluenose1 · 24 July 2018 at 6:28PM

Does anyone know if LGPS schemes offer Salary Sacrifice?
My friends SIL is 58 and would like to retire at 60. She has some savings but doesn't sound like she is making best use of them I didn't know if she should consider an AVC for the last few years, though had not realised there may be penalties if taking out early. She has only been in the LGPS approx 6 years.

Silvertabby · 24 July 2018 at 6:40PM

bluenose1 wrote: »

Does anyone know if LGPS schemes offer Salary Sacrifice?
My friends SIL is 58 and would like to retire at 60. She has some savings but doesn't sound like she is making best use of them I didn't know if she should consider an AVC for the last few years, though had not realised there may be penalties if taking out early. She has only been in the LGPS approx 6 years.

Monthly payments to an in-house AVC arrangement are taken directly from salary, hence the tax relief. The Pru have an early cash-out penalty, so I assume other providers do as well. The penalty applies in the first 5 years, but is on a sliding scale.

Retiring at 60 with only 8 years service means that she will take a substantial hit for taking her LGPS benefits early (before 65 for her pre 2014 service, State pension age for her post 2014 service).

LGPS AVC’s

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