Know anything about pensions...? Please?

[AnnaK]

I wanted to put a bit more into my work pension and was then told I had two choices. One is additional pension contributions (APCs) to the fund (West Midlands Pension Fund) and the other is additional voluntary contributions (AVCs) to Prudential. I don't understand the difference. Any advice on what to do gratefully received...
Thank you!

Hmm, nor do I just with that info... and I'm a pensions adviser.

The AVC with the Pru is a very 'usual' route for a money purchase pension pot that builds alongside a defined benefit scheme.

I think the APC will be added years... but that's an assumption (therefore bollocks use in reality).

Does the APC talk about a set cost or added years?

Ooh, will check and get back to you. Thank you so much!

According to the website, the local government pension scheme talks about buying extra pension or buying lost pensions. As far as I am aware, I don't have any major gaps in my payment history (apart from having children).

I suppose another question would be - how do I find out if I do have gaps in my pension history...?

Thank you!!

This is interesting: One of the terms states 'In the event of your death, no extra pension benefits will be payable to your dependants in respect of the extra pension bought (as the APCs buy extra pension for you only).'

So should I not bother with the pension, just put the extra into savings...?

This is so complicated!

Is this this a local govt pension scheme? (LGPS?)

i do AVCs with Prudential , but its adminstered though the LGPS route ..Its a really good deal you only pay tax on 80% of what you put in and (it may have changed as ive been doing it a while ) but with with mine you can get the whole lot out tax free at the end of it ( which is why im doing it as i am saving for a campervan to bomb around europe like a saga lout !) . I pay my usual LGPS contributions too..

they do the same deal with NHS, teachers and other public sector schemes also I think.. Your pensions person at work should be able to tell you more

AVCs you c nanominate a person to get them if you die .. child or DH/DW/ DP/etc) c

So sounds like APCs are what a PP called Added Years contributions which means you sign up to a contract under which (assuming you pay the agreed level of contributions for the agreed length of time) you buy extra years of defined benefit pension. That pension would just be for you though - unlike the rest of your pension there wouldn't be an attaching spouse/partner pension for this extra bit if you died. Big upside of this is you are likely to pay much less than the pension actually costs to provide.

The AVCs are almost certainly money purchase which means whatever the contributions plus investment return produces by the time you retire will be used to buy pension at that time. So the risk of pension being more expensive by then is borne by you. It may be that there will be more flexibility about how to use that money at retirement though than with the APCs so that could be an advantage.

big upside is you're likely to pay much less than the pension costs to provide

Not true. It is an actuarial calculation of fair value.

Basically they are cheaper as they provide less. I would suggest the only benefit of extra years is longevity risk. This is covered by the basic pension so I would think the FSAVC route is better.

ALSO, depending on your earnings the AVC will cost you 80%, 60%, 55% of the contribution as it is indeed tax efficient.

The other MASSIVE consideration is the you cannot transfer out of an unfunded scheme. The AVCS will offer cash and access to capital PLUS you can leave the pot to your children - it won't die with you as an added year would.

My 'recommendation' as such would be go the AVC route. Clearly this isn't worth a jot, but I can't see that in RL I'd say much different. I'm a pensions adviser.

Thank you for all your input! Really appreciate it. Next step, find out what my state pension is worth (I worked abroad for a while!) and then start paying into the AVC route.