LGPS - AVC, APC or something else?

[apcavcwtf]

Hi,

I've hit the big 4 0 this year and the LGPS that I've been paying into for over 15 years and pretty much never given a second thought to suddenly seems much more important.

I pay in 6.5% of my salary which is around £30k

I finally went into the pension scheme website and didn't even realise that you can take up to 25% as a tax free lump sum, to give you an idea of my naivety in this subject.

I can see that taking a higher lump sum, which is incredibly attractive to me as someone who has never had much money, will reduce the annual pension income.

My train of thought is that if I spend the next 28 years (eek!) paying a small amount extra into my pension, this would hopefully allow me to both have the max 25% lump sum and offset at least partially the reduction in annual pension.

My questions are

Is my train of thought above correct?
I was only going to add £30-£50 per month into the addition payment. But would it be better as an AVC or APC? I know the terms but don't fully understand the concept/pros/cons
Is there a magic number of years where it is most beneficial to start paying more. Such as holding off and boosting just in my last 10 years before retirement?

Thank you to anyone that is able to shed any light on the above. There should be training courses for pensions, it's a whole new world!

Lgps you take the whole lump sum tax free . I don't think you can just take 25%

You can have up to 25% maximum as a lump sum tax free payment.

Suggest you start my looking at the info on your scheme administrators website ( May be your own council or the county council if you work in a lower tier authority). First example www.wmpfonline.com/sites/default/files/2023-11/Building-Up-Extra-Savings-2023.pdf

This is what it says on my Lgps page:

Income Tax
Your LGPS pension is taxable, but your lump sum is paid tax free. Whether you pay tax when you retire depends on the amount of your pension and your personal circumstances.

You can only take 25% of the pot as a lump sum - may be that's what you're thinking of?

There are different parts of the LGPS. If you have any years in the pre 2008 scheme, this has an automatic lump sum, and you can convert pension to increase it.

The 2008-2016 scheme is still final salary based, but you have to convert the pension to the lump sum if you want it .

From 2016, it's career average, with pension able to convert to a lump sum.

With AVCs you pay in and invest these; you then get their value as a tax free sun, provided that you take them at the same time as your main pension and they are below the limit (25% of your total benefit). As these are invested, rather than guaranteed... In general people are better doing this earlier rather than later as they benefit from compounding over time and growth is more usual over the longer period - they're much more risky if you're only investing for a short period.

If you look at the Facebook group for NHS and public sector pensions, run by pengage there are a series of webinars on options for the LGPS.

Incorrect. 25% can be taken tax free, any more would be taxed.

I was in LGPS for 36 years, retired at 57.

I started doing AVCs when I was in my 20s, stopped a couple of times due to life things - house purchase, baby etc.
Didn't put mega bucks in.

Later on, I did put more in to avoid the 40% tax trap.

Came to the year before retirement and I looked into what options I had (I knew what my whole pension value was, pension/lump sum options also).

I checked this about 6 times before proceeding - I put the maximum of 50% of my salary into my AVC. I got all that money back tax free as part of my 25% lump sum.

I'd had sight of all AVCs in the organisation for more than 25 years. I was the only employee to ever do this - which I find unbelievable really as it's a no brainer (as long as you can afford to lose the salary).

Get planning now, the scheme is not as good as it was so it's more important than ever.

Ask your union if they can organise a pension workshop or HR.@