Don't want to work to 68

MPD
MPD Posts: 261 Forumite
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in Pensions, annuities & retirement planning
I am 43, when I started work my SPA was 60, now its 67 and soon to be 68. I am a member of the LGPS (all post 2014 service) so this is linked to SPA. In addition to this I have deferred DB pension of circa £4k due at 60. I expect to receive a full state pension and approx £11k from the LGPS at 68.

I would like to reduce the 68 to as close to 60 as possible. My thoughts on this are using the LGPS AVC scheme provided by the Pru to take advantage of the tax savings available and for simplicity with the contributions being taken through payroll. I would then use this as a bridge before taking my LGPS at SPA or slightly before if I could live with the reduction.

I am looking at investing in the Prudential International Equity Fund with a fee of 0.65% pa, these are invested in M&G PP International Equity Funds.

Does this sound like a sensible plan? I am looking to reduce charges to a minimum and access the funds from around 60 onwards.
After years of disappointment with get-rich-quick schemes, I know I'm gonna get rich with this scheme...and quick! - Homer Simpson
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Comments

  • quotememiserable
    quotememiserable Posts: 590 Forumite
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    Certainly paying AVCs so that you have access to an early pension works well with your plan. Not sure about the fund choice though. Although the press make a lot of fuss about fees, they don't know much about pensions. Fund performance is far more important. What options do they offer? It's normally a good idea to spread the risk around rather than go into just one fund.
  • dunstonh
    dunstonh Posts: 116,252 Forumite
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    I am 43, when I started work my SPA was 60, now its 67 and soon to be 68.

    So, you are 43 in 2018. The state pension age was increased from 60 to 65 back in 1993. That would make you 18 at the time. Possibly the very same year you started work. So, the increases should not have been a surprise for you.

    AVCs are largely old hat now. Most havent been updated since 2006 when the rules changed allowing companies to cease offering them. Many hadnt been changed for over a decade before that.

    That doesnt mean all AVCs are bad. There are a few gems and a few with quirks that can be beneficial. However, if it has none of those things, you can end up with an option with limited investments, out-of-date charges and no flexibility to meet current retirement income options. For example, you mention the charge is 0.65%. That is double what you can get in the retail pension market.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • AlanP_2
    AlanP_2 Posts: 3,252 Forumite
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    edited 6 March 2018 at 10:02PM
    quotememiserable wrote: »
    Certainly paying AVCs so that you have access to an early pension works well with your plan. Not sure about the fund choice though. Although the press make a lot of fuss about fees, they don't know much about pensions. Fund performance is far more important. What options do they offer? It's normally a good idea to spread the risk around rather than go into just one fund.

    It's a fund of funds so risks are spread. Essentially no UK content though so quite exposed to currency movements.

    Following the Brexit vote overseas investments rose substantially because the value of the £ fell in value against Dollar / Euro etc. not because the underlying investments had performed wonderfully. If the £ becomes stronger the reverse will happen.

    Most UK based investors would have a reasonable proportion of their money invested in UK based investments to "balance" this out a bit more.

    What other fund choices do you have OP, and don't worry too much about the charge for now?

    With my LGPS AVC if I wanted to access the AVC without taking the main CARE pension I would have to transfer it out as the scheme doesn't allow them to be disconnected. Have you checked this out with your scheme admin team?

    The big advantage of the LGPS AVC scheme is that the AVC pot can be taken as your 25% tax free lump sum when taken at the the same time as your main benefits, breaking the link and taking it early takes away that advantage so other options are also worth thinking about.
  • Lungboy
    Lungboy Posts: 1,953 Forumite
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    I'm in almost the exact same situation as the OP, (a few years younger but otherwise identical from what's been mentioned) and have pretty much written off the AVC option as it seems to offer no benefits at all for someone looking at early retirement over a SIPP while being hugely restricted in the funds on offer.
  • Brynsam
    Brynsam Posts: 3,643 Forumite
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    Look at other options as well as pensions. The days when 'retirement income' = 'pension' are long gone.
  • FatherAbraham
    FatherAbraham Posts: 1,024 Forumite
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    Lungboy wrote: »
    I'm in almost the exact same situation as the OP, (a few years younger but otherwise identical from what's been mentioned) and have pretty much written off the AVC option as it seems to offer no benefits at all for someone looking at early retirement over a SIPP while being hugely restricted in the funds on offer.

    Can the AVC contributions be made through payroll as sacrificed salary to avoid National Insurance charges?
    Thus the old Gentleman ended his Harangue. The People heard it, and approved the Doctrine, and immediately practised the Contrary, just as if it had been a common Sermon; for the Vendue opened ...
    THE WAY TO WEALTH, Benjamin Franklin, 1758 AD
  • Lungboy
    Lungboy Posts: 1,953 Forumite
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    FatherAbraham wrote: »
    Can the AVC contributions be made through payroll as sacrificed salary to avoid National Insurance charges?

    Not where I work unfortunately, but some places they can be.
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
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    Don't forget about ISAs......tax free growth, no tax on withdrawals, of course, and the lack of withdrawal restrictions give you great early retirement income flexibility.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • Lungboy
    Lungboy Posts: 1,953 Forumite
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    bostonerimus wrote: »
    Don't forget about ISAs......tax free growth, no tax on withdrawals, of course, and the lack of withdrawal restrictions give you great early retirement income flexibility.

    I have a chronic illness so having money in a pension is more appealing than an ISA as it won't count towards means tested benefits if I had to leave my job. I do plan to open an ISA too, but with the pension as my core investment.
  • MPD
    MPD Posts: 261 Forumite
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    bostonerimus wrote: »
    Don't forget about ISAs......tax free growth, no tax on withdrawals, of course, and the lack of withdrawal restrictions give you great early retirement income flexibility.
    I have decided on a pension due to the tax relief and not wanting it until around 60.
    After years of disappointment with get-rich-quick schemes, I know I'm gonna get rich with this scheme...and quick! - Homer Simpson
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