Pensions advice
Discussion
My wife and I are in the fortunate position of having a decent amount of money left over every month (standard rate tax payers). She has a teachers pension and I have an LGPS pension. Knowing that my pension won't be as good as hers (for a start I don't get paid as much), I've been looking into ways of making it better.
We both like the idea of part-retiring at 55. We'd probably leave our full time jobs and get part time jobs, partly to tide us over and partly to give us something to do.
I've read about AVPs, AVCs and SIPPs (I would go with Vanguard as I already have a S&S ISA with them). I have checked with my employer and they have confirmed they will not match any additional contributions to my LGPS pot for AVP or the Pru pension for AVC. Apparently some local governments do so it was worth checking.
From what I gather (please correct me if I'm wrong), AVPs are useful for enhancing the amount of pension paid but at pension age, not any earlier.
AVCs and SIPPs can be accessed from 55 so I think that is what I need. I want to have some pension available to take between 55 and state pension age, but I would also like to boost my LGPS pension for after SPA as well.
AVCs are salary sacrifice and benefit from not having to pay tax and NI on the contributions.
SIPPs are not salary sacrifice so tax and NI is taken, but I think the government tops up what I pay in to repay the 20% lost on tax, but not NI.
If I'm right, does that mean in my case the main difference is the NI? So AVCs would be better value?
I've had a look at the fees for both products. For the Pru AVCs the fee will be ~0.65%, and for the Vanguard SIPP it will be 0.15%.
Advice and corrections welcome!
We both like the idea of part-retiring at 55. We'd probably leave our full time jobs and get part time jobs, partly to tide us over and partly to give us something to do.
I've read about AVPs, AVCs and SIPPs (I would go with Vanguard as I already have a S&S ISA with them). I have checked with my employer and they have confirmed they will not match any additional contributions to my LGPS pot for AVP or the Pru pension for AVC. Apparently some local governments do so it was worth checking.
From what I gather (please correct me if I'm wrong), AVPs are useful for enhancing the amount of pension paid but at pension age, not any earlier.
AVCs and SIPPs can be accessed from 55 so I think that is what I need. I want to have some pension available to take between 55 and state pension age, but I would also like to boost my LGPS pension for after SPA as well.
AVCs are salary sacrifice and benefit from not having to pay tax and NI on the contributions.
SIPPs are not salary sacrifice so tax and NI is taken, but I think the government tops up what I pay in to repay the 20% lost on tax, but not NI.
If I'm right, does that mean in my case the main difference is the NI? So AVCs would be better value?
I've had a look at the fees for both products. For the Pru AVCs the fee will be ~0.65%, and for the Vanguard SIPP it will be 0.15%.
Advice and corrections welcome!
Have a look at the IM sticky thread at the top of the fourm & book a call with Nik - he can go through the pros & cons of each alternative. ISAs are another option for some of your money - they have the advantage of being more flexible than a pension & tax free wen you with draw funds.
https://www.pistonheads.com/gassing/topic.asp?h=0&...
https://www.pistonheads.com/gassing/topic.asp?h=0&...
JordanT91 said:
AVCs are salary sacrifice and benefit from not having to pay tax and NI on the contributions.
SIPPs are not salary sacrifice so tax and NI is taken, but I think the government tops up what I pay in to repay the 20% lost on tax, but not NI.
If I'm right, does that mean in my case the main difference is the NI? So AVCs would be better value?
I've had a look at the fees for both products. For the Pru AVCs the fee will be ~0.65%, and for the Vanguard SIPP it will be 0.15%.
Advice and corrections welcome!
yes basic tax is 20%, NI 13% so for every £1000 salary you put in via salary sacrifice you would get £1000 invested . The SIPP would have tax/ni taken from salary, then the tax added back on to £870. If you put it into an ISA you would get £670. Salary sacrifice is a no brainer. You could move your pot Pru>SIPP yearly?SIPPs are not salary sacrifice so tax and NI is taken, but I think the government tops up what I pay in to repay the 20% lost on tax, but not NI.
If I'm right, does that mean in my case the main difference is the NI? So AVCs would be better value?
I've had a look at the fees for both products. For the Pru AVCs the fee will be ~0.65%, and for the Vanguard SIPP it will be 0.15%.
Advice and corrections welcome!
Make sure you have some cash savings too. Once the penny drops, the temptation is to put as much into salary sacrifice as possible as you also get compound growth on the tax/NI and you can take 25% of pension pot tax free post 55. If you judge it all right you can live off the tax free lump sum and take pension monies below basic rate tax each year and pay no tax there too.
Im nearly 50 and this is pretty much my plan (as soon as my new employer gets salary sacrifice running)
Remember that,
- Scheme AVCs can generally be used 100% to fund Tax Free Cash from your employer's pension scheme. Very handy if it's a Defined Benefit scheme and the investment risk stays with your employer.
- SIPP tax free cash will never be more than 25% and then the pension is taxed at your marginal rate.
I think I'm right in saying that depending on your age, it may be that you won't be able to access a Sipp until you are 57 or 58?
So you want might want to dribble a little into an isa if you are fixed on 55. But as said above, the circa 30% head start you get through salary sacrifice should not be overlooked!
So you want might want to dribble a little into an isa if you are fixed on 55. But as said above, the circa 30% head start you get through salary sacrifice should not be overlooked!
JordanT91 said:
Thanks all. I've applied for the AVCs and we'll see how it goes.
Hi... reading you post you have two requirements:1) to save/invest for a possible retirement at age 55
2) to increase the value of your pension once you draw on it (LGPS)
I have to caveat my next comment by saying I am not an LGPS expert so...
My understanding is that LGPS AVCs cannot be taken outside of drawing your main LGPS pension so, the extra monies into the AVCs will help you address point 2, and is the most cost efficient way of doing this.
Regarding point 1, early retirement, I don't believe you've confirmed your age (or your tax status; assuming a BRT payer) but, if you are not a HRT or after the paying the AVCs are no longer a HRT payer then, you need to break your retirement down in to chunks and look at which vehicles support that option best.
If you are younger than 40 then, you may want to look in to using a LISA as part of your retirement planning, i.e. funding the gap between age 60 and 67/68 for the LGPS. Assuming you will be 55 after 2028 then you can fund those years from a SIPP (age 58-60), or 55 to 60 if you reach age 55 before 2028. For any retirement before the pension early access age, you will need to use a ISA.
If you are young enough (younger than 40) and the above assumptions are correct then you should probably prioritise a LISA as you cannot contribute after age 50.
Regarding your wife’s teacher pension read everything from this guy, he knows what he’s talking about
https://dfountain.co.uk/blog/
https://dfountain.co.uk/blog/
covmutley said:
I think I'm right in saying that depending on your age, it may be that you won't be able to access a Sipp until you are 57 or 58?
So you want might want to dribble a little into an isa if you are fixed on 55. But as said above, the circa 30% head start you get through salary sacrifice should not be overlooked!
That’s right. There has always been the expectation that the minimum age at which you can take your pension will be broadly 10 years less than your State pension age.So you want might want to dribble a little into an isa if you are fixed on 55. But as said above, the circa 30% head start you get through salary sacrifice should not be overlooked!
At the moment, the minimum retirement age is 55 but the government has just announced a consultation on increasing this to 58 from 2028. This would affect anyone reaching age 58 after that date (i.e. below age 50 now).
There is some talk about retirement age protection for some people (army, fire service, police) but perhaps also more widely. It’s not yet clear.
Basically, if you want to retire at 55 and are aged below 50 now, you’ll need to make some savings outside of your pension to bridge the gap between 55 and 58.
cloud_dog said:
JordanT91 said:
Thanks all. I've applied for the AVCs and we'll see how it goes.
Hi... reading you post you have two requirements:1) to save/invest for a possible retirement at age 55
2) to increase the value of your pension once you draw on it (LGPS)
I have to caveat my next comment by saying I am not an LGPS expert so...
My understanding is that LGPS AVCs cannot be taken outside of drawing your main LGPS pension so, the extra monies into the AVCs will help you address point 2, and is the most cost efficient way of doing this.
Regarding point 1, early retirement, I don't believe you've confirmed your age (or your tax status; assuming a BRT payer) but, if you are not a HRT or after the paying the AVCs are no longer a HRT payer then, you need to break your retirement down in to chunks and look at which vehicles support that option best.
If you are younger than 40 then, you may want to look in to using a LISA as part of your retirement planning, i.e. funding the gap between age 60 and 67/68 for the LGPS. Assuming you will be 55 after 2028 then you can fund those years from a SIPP (age 58-60), or 55 to 60 if you reach age 55 before 2028. For any retirement before the pension early access age, you will need to use a ISA.
If you are young enough (younger than 40) and the above assumptions are correct then you should probably prioritise a LISA as you cannot contribute after age 50.
Well you don’t have to put into a private pension, in the LGPS you could purchase Additional Pension Contributions. Then retire early with reduced amount etc
https://www.lgpsmember.org/arm/already-member-extr...
https://www.lgpsmember.org/arm/already-member-extr...
Mr Pointy said:
85Carrera said:
anonymous said:
[redacted]
He’s Nik isn’t he? 
Edited by JulianPH on Saturday 10th April 09:05
JulianPH said:
Mr Pointy said:
85Carrera said:
anonymous said:
[redacted]
He’s Nik isn’t he? JordanT91 said:
I'm 29 and a BRT payer. I didn't realise the AVCs can't be taken before the LGPS. I thought they could be transferred out to another scheme at 55 and used. That's a shame. I'll need to put money into yet another scheme.
Hi.... You will probably need to double check with your scheme administrators but I found some information which may help. It appears LGPS supports two types of AVCs, one being linked to your main scheme and one being a free-standing AVC. The linked AVC can only be drawn at the time of taking your LGPS pension but does provide benefits, i.e. the AVC money can be used as part (all) of the PCLS. The free- standing AVC is basically a DC pension and can be transferred out before drawing your LGPS main pension.This is from LGPS members site (but you will probably want to confirm with your scheme providers):
https://lgpsmember.org/arm/already-member-extra.ph...
2. Additional Voluntary Contributions (AVCs)
When you save AVCs you build up a pot of money which is then used to provide additional benefits to your LGPS benefits. All local government pension funds have an arrangement with an AVC provider (often an insurance company or building society) in which you can invest money. The money is deducted directly from your pay before your tax is worked out, so, if you pay tax you receive tax relief automatically. You have your own personal account and you decide how the money in your pot is to be invested.You can elect to pay an AVC if you are in either the main or 50/50 section of the LGPS.
You can pay up to 100% of your pensionable pay into an in-house AVC. Your employer can also pay towards your AVC at their discretion. This is known as a Shared Cost AVC.
Use the find out more buttons on the right hand side to find out how you can use the money in your AVC account.
You can also pay AVCs to provide extra life cover. Your membership of the LGPS already gives you cover of three times your assumed pensionable pay if you die in service, but you can pay AVCs to increase this and provide additional benefits for your dependants (if the facility your pension fund has set up includes it) if you die in service. Any extra cover you buy will stop when you retire or leave.
Free Standing Additional Voluntary Contributions (FASVCs)
These are similar to in-house AVCs but are not linked to the LGPS in anyway. With FSAVCs, you choose the provider, usually an insurance company. You may want to consider the different charges, alternative investments and past performance when you do this.So, you may want to find out if you could perhaps use both AVC methods, as it appears (TBC) that the deductions should benefit from SS and the FSAVC would provide you with the flexibility you are looking for.
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