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  • FIRST POST
    • Lungboy
    • By Lungboy 22nd Feb 17, 6:46 AM
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    Lungboy
    Unlikely to get close to qualifying for pension, best options?
    • #1
    • 22nd Feb 17, 6:46 AM
    Unlikely to get close to qualifying for pension, best options? 22nd Feb 17 at 6:46 AM
    I'm 37 and only have 6 or so full years towards my state pension due to extended time at university as a student. I have a full time job with a LGPS pension. I also have a chronic deteriorating health issue which means I'm very unlikely to get close to 35 years for the state pension and my workplace pension is likely to be too small to survive on. I am utterly clueless about pensions, so what are the best options for me to build up something reasonable?
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    • Lungboy
    • By Lungboy 30th Jan 18, 1:42 PM
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    Lungboy
    My main worry is that if I did need to retire early due to ill health, the ISA would be used as capital in assessing means tested benefits whereas in the SIPP it wouldn't. However, the access to the ISA might be very handy at short notice if things did go wrong with my health. Maybe a 50/50 ISA/SIPP split is the way to go, a bit more cautious in the ISA and a bit more bullish in the SIPP perhaps.
    • Lungboy
    • By Lungboy 26th Feb 18, 1:38 PM
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    Lungboy
    My hoped-for regrade at work looks like it's not going to happen now, so rather than investing my new earnings, I'm back to theorising the best way to do it if I ever get those earnings. I've asked work for clarification on AVC payments as my work pension department told me they were pre NI but the Prudential advisor said they were post NI so I'm not sure who to believe. Obviously, pre NI would be very tempting so I've been looking at the available funds with the Prudential AVC.

    Does anyone have any opinion on the Pru International Equity fund (http://www.fundslibrary.co.uk/FundsLibrary.BrandedTools/PruConsumer/DataOnline/HtmlFactsheet/2e5ba577-b6ee-45c9-8de6-af52962fb39c#essentials)? I'd probably team it up with a Vanguard 60 ISA to begin with to add some more UK focused money and lower the risk a touch. If all went to plan then in the future I'd add small cap in another ISA, possibly transfering across the Vanguard ISA if the costs were lower that way.

    Does all that sound reasonable (obviously assuming the pre NI thing works out in my favour)?
    • xylophone
    • By xylophone 26th Feb 18, 3:15 PM
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    xylophone
    I have a full time job with a LGPS pension.
    I'm back to theorising the best way to do it if I ever get those earnings. I've asked work for clarification on AVC payments as my work pension department told me they were pre NI but the Prudential advisor said they were post NI so I'm not sure who to believe.
    In LGPS your pension contribution is made on a "net pay" basis.

    It would seem from this example

    https://www.yourpension.org.uk/Files/Files/Herts%20files/Herts%20employers/AE%20Factsheet%20-%20LGPS%202014%20v2.pdf

    Your AVCs are taken from your pay before tax. Any money you would normally pay as income tax automatically goes into your AVC pot instead as you can see in the picture below. The amount depends on whether you are a basic, higher or additional rate taxpayer. If you don't pay tax, you won't benefit from tax savings.



    that the Pru AVC's are also "net pay"?

    It would be best to check again with your LGPS administrator..

    Re "net pay" and NI - see this from NOW pensions https://www.nowpensions.com/help-centre/faqs/contributions/is-the-contribution-taken-before-tax-and-ni

    Our process is defined by HMRC as a net pay arrangement and requires the company to take any contributions due from the employee from gross pay before tax. This means the employee's taxable pay is lowered by the amount of their contribution, resulting in employees getting income tax relief at the highest rate that they pay.

    Employer contributions are paid in addition and employees pay no tax on these contributions. National insurance is calculated on pay before pension contributions are taken so there is no impact to how much national insurance is paid unless the employer has chosen to use salary sacrifice.
    Last edited by xylophone; 26-02-2018 at 3:20 PM. Reason: correcting mse glitch
    • Lungboy
    • By Lungboy 26th Feb 18, 4:03 PM
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    Lungboy
    Thanks for that, sounds like I'll be out of luck but I'll wait to see what my enquiries unearth, as the Pru chap said last summer that salary sacrifice was available to LGAVCs if they chose to activate it. Hopefully they will have done.

    In general though, is my thinking reasonable? Switch out the Pru AVC fund for something like L&G MI6 in a SIPP alongside VLS60 in an ISA then later add in small cap.
    • teddysmum
    • By teddysmum 26th Feb 18, 4:24 PM
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    teddysmum
    Thanks for that, sounds like I'll be out of luck but I'll wait to see what my enquiries unearth, as the Pru chap said last summer that salary sacrifice was available to LGAVCs if they chose to activate it. Hopefully they will have done.

    In general though, is my thinking reasonable? Switch out the Pru AVC fund for something like L&G MI6 in a SIPP alongside VLS60 in an ISA then later add in small cap.
    Originally posted by Lungboy
    On your side is the new proposed law ,making donation something one has to opt out of, as many people are apathetic and won't bother opting out, thus providing more transplant opportunities.
    • OldBeanz
    • By OldBeanz 27th Feb 18, 5:28 AM
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    OldBeanz
    Government based pensions tend not to allow you to benefit from a cut in NI through paying extra into your pension. The big attraction of a LGPS AVC is that it can be taken tax free as a lump sum so tax relief on the way in and no tax on the way out.
    • Lungboy
    • By Lungboy 27th Feb 18, 9:12 AM
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    Lungboy
    The ability to take it as a tfls only kicks in if I take it at the same time as my pension, and only if it's less than 25% of my overall pot. While I'd hope the latter is true, the former might well not be attractive.

    e: my work pension department have confirmed that AVCs are paid after NI so I think they are back off the table as the available funds are very limited and quite expensive.
    Last edited by Lungboy; 27-02-2018 at 9:44 AM.
    • Lungboy
    • By Lungboy 6th Mar 18, 12:06 PM
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    Lungboy
    OK, I'm sold on a SIPP for now, and possibly adding an ISA later if my wage increases. I want the SIPP to have a passive fund at its core, and as I'm looking at 21+ years I'm happy with riskier than average funds and have narrowed the choice to 4: VLS80, BR Consensus 85, L&G MI6 and Architas MA Passive Growth. How on earth do I choose between them though? I realise that they are all run with differing styles (VLS being a fixed ratio, MI6 being more fluid etc) and that this leads to different considerations later on (eg. VLS is "easier" to add something else alongside it as you know what your absolute ratio of equity to bonds is at all times). What I don't know, as a total novice investor, is which of these is best for me. How on earth do i choose between these 4 funds, when I don't have the experience to accurately assess them? Am I perhaps overthinking it?
    • IanSt
    • By IanSt 8th Mar 18, 9:58 AM
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    IanSt
    Just one person's opinion here, but a lot of people (both here and elsewhere) do like the VLS range of funds, so unless there's something in one of the others that you really like, then the VLS80 wouldn't be the worst of funds to start off with.
    • Lungboy
    • By Lungboy 24th May 18, 1:49 PM
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    Lungboy
    I've finally taken the plunge. £1300 lump into a Cavendish SIPP, all in Vanguard FTSE Global All Cap. I intend to swap it to Vanguard when they release their SIPP later in the year, assuming it's cheaper. I'm aiming to make contributions totaling ~£3200 gross per year.
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