LGPS AVC’s

[Temporaryname158]

I am in my local government pension scheme. I have been advised by a Wesleyan financial advisor to make AVC’s.

a look online says there are fees for this. Does anyone know how much and any other costs I should be aware of? I feel very in the dark about what it all really means and the reading I do doesn’t seem to answer my questions. Wesleyan offered to set up the AVC for me for about £800, how easy is it to do it yourself?

I am trying to balance the benefit of AVC’s v having the cash to spend now.

I'm early 40’s and hope to put away circa £200pcm if that makes any difference.

I understand I can take it all as a tax free lump sum upon retirement.

anything else I should know or consider?

thank you in advance!!

Not sure who Wesleyan financial advisors are, but have you been in touch with your local LGPS?

I believe you can attend webinars about AVCs and book one to one sessions with the schemes AVC provider.

Have a look here and make enquiries with whoever it is who provides the AVC service for your scheme.

ETA don't pay up front to set them up. Go through your scheme provider and see what they saym

https://www.lgpsmember.org/contact-your-fund/

Have you spoken to whoever deals with pensions at work?

I set one up about 5 years ago. Found the pensions link on the intranet, navigated to the avc website, filled in details, all done.

no fees as far as I know. Maybe the admin ones you get with all share funds, but nothing specific.

The person at work is next to useless at looked at me like I’d gone to HR and asked for a dragon!

I will contact the LGPS but last time the sent me a website link which again was fairly vague.

thanks @Yogatoga1 if it can be set up myself I’d prefer that than paying a financial advisor a fee!

have anyone else got direct experience of local government pension schemes and AVC’s?

Hi OP, your LG employer (council?) may offer AVCs but I believe not all do. If they do offer AVCs you should do it through the employer and there wouldn't be any set-up fees. Most councils have their pension info on their public website; have you checked your employer's website?

There should not be a set up fee, and certainly not £800. Depending on the fund you choose, there is likely to be a Fund Management fee of around 2%.
From what I understand, and happy to be corrected, you can only take 100% as a tax free lump sum at the same time as your main scheme benefits (nominally state pension age). You can take 25% as a tax free lump sum from age 57.
I'm somewhat surprised your HR Team are not aware of the scheme. We have quarterly "info sessions" on AVC's (ie the private finance company wants your business).

With regards to the £200pcm you have. Do you have 6 months worth of wages in savings? Is your mortgage paid off? Do you have other high interest dept?

Debt not dept obviously!

https://www.lgpsmember.org/your-pension/paying-in/paying-more/overview/

I pay into my LGPS shared cost AVC scheme - it says on the link above that all LGPS funds have them. It’s a significant benefit particularly as I’m a higher rate tax payer.

You definitely don’t need to pay Wesleyan to set it up for you!

Visit the website for your pension fund and it will tell you on there who their AVC provider is and how to apply. Go to the fund website, not your employer - employers often don’t know much about the LGPS.

Be aware that there’s different ways of paying additional contributions and these provide different benefits. The link posted above by TheOnlyAlethia explains the options so you can decide what is best for you.

I’m in the LPFA pension scheme (part of LGPS I believe). I set this up myself (was advertised by the pension scheme/work HR) and the money gets deducted from my pre-tax salary - as a basic rate tax payer my salary is reduced by £80 for every £100 invested in the pension. I put the money in few different low cost tracker funds. I’m happy with how it’s going so far.

Thank you all for the advice

@JobMatch3000 I do have 6 months saving, no debt other than my mortgage and I am overpaying this also at around £200 per month

I contacted GMPF, my LGPS provider, they advised that AVCs they recommend we’re with prudential, although it begins with and M and the name has completely left my mind!

I pay a % from salary which is just over £200 p/m and pay a small % for a management fee. No upfront costs for setting up. The only thing I had to do was decide which fund to pay into.

I do the same and sorted it out myself with no fee involved. I had to choose which provider to pay the AVCs too. Think it was prudential or standard life and had to then choose which fund to invest in. The downside is you have to take this at the same time as the main lgps and if you take it early you are penalised - ie have an actuarial reduction. in my scheme you can take the avcs as cash or use them to buy extra money in the main scheme. some Lgps schemes allow you to do this via salary sacrifice which also saves you NI on top.

I have AVCs alongside my LGPS and it’s shared cost so as a pp says you save on NI as well. Now that NI has reduced a bit I’m not sure of the figures but when I started paying them you got £100 into the AVC for the cost of £67 on your payslip iyswim

Our provider is Prudential and it’s down through AVC Wise (the shared cost scheme) There are a few different investment pots you can direct your money too, and you choose depending on the risk level you want and your age etc. Both websites have videos explaining it all and it is much simpler than it sounds

The only fees I pay are for one of the investment pots I chose which has a small % management fee. I’m very happy with it all as it’s building upon nicely alongside my LGPS and I don’t miss the money so much on my payslip. I would definitely recommend it

Can anyone explain in really
Simple terms AVC

If based on those other figures £100 AVC will cost £67 of that the only benefit? Or does employer benefit you also or is it the best alternative way of boosting pension?

My understanding is that for every £100 you earn 67 goes to you, the rest is tax and ni.

so you put £100 into your avc, your salary will only go down £67.

you can put the £100 after tax into a SIPP, and be debated the tax, so £120 will go into your pension. You don’t get the NI saving though, so the avc is better.

for me, bordering on the 50k mark depending on overtime, it also brings my taxable salary down so I don’t need to submit a tax return for child benefit.

so for me it’s the best way to boost pension, avoid the 40% tax bracket, and keep child benefit.

someone on another thread has also pointed out that if you have a child at uni, loans are up until 42k parental income. I am wondering if I can put another couple of hundred a month in for a few years to bring my earnings below that 🤔