Pension and AVCs and Universal Credit

[Bigwelshlamb]

Miraculously, I have got a job in my mid fifties....it's Civil Service so a good pension ( yes, I know it's late). I am still a carer for the person I've been caring for and have been on UC for years and have 3 dcs in school. I have done the sums and obviously I need to do my best to build up a little bit of pension as I've not had the opportunity before now. I have done the calculations on Turn2us and I will lose my Carers Allowance and I think free school meals, although this is more opaque. What I need to know is, is it possible for me to pay a little extra into my pension pot and essentially reduce my 'income'...?What I read says yes but it doesn't feel like it could actually happen. It says at my grand old age I should be paying 30% of my salary into a pension but I cannot do that much but I would be happy to salary sacrifice into an AVC to attempt to get a bit more pension going forward... Any advice would be very welcome.

Bump

Bump

The standard civil service pension you sign up to it a 'defined benefit' scheme. So your employer deducts a set percentage of your wage (the rates are based on your salary and published online) and in return you will receive a guaranteed annual income from the pension provider on retirement. The longer you pay into the pension for and the higher your salary the larger the annual income will be. You get a statement each year telling you how much you will receive. An additional benefit of the scheme means you also can nominate a death in service beneficiary who will receive 2.5 times your annual salary as a cash lump sum if you die whilst employed. Plus maybe a small survivors pension depending on your relationship and if they are a dependent etc.

The AVCs you can pay are basically the equivalent of opening a private SIPP pension, this is called 'defined contribution'. You are essentially buying investments through a fund set up by Legal and General. Your employer doesn't pay anything into this. The value of this pot of money may increase or decrease depending on how well the investments perform so it's not guaranteed like your main pension. If you die you can nominate someone to inherit the value of those investments. You ask your employer to deduct an amount you choose from your monthly wage (you decide if it's a percentage or amount of money) to pay directly to Legal and General who invests it for you. You can choose the standard AVC fund or pick your own from a list (take advice before doing this). There is a form on the pension website that you fill in and normally need to return to your employers payroll team so they can start deductions from your salary.

There is no longer a way to buy added pension for the defined benefit civil service pension like there used to be so AVCs are the only way.

.

According to the Civil Service Pensions website you can still buy added pension...

www.civilservicepensionscheme.org.uk/faqs/increase-your-pension/can-you-purchase-added-years-in-alpha/#:~:text=You%20can't%20purchase%20added,out%20more%20about%20added%20pension.

Your department will likely run an introduction to the pension session every now and then so it's worth joining one to ask questions as there is a lot more to understand but hopefully that's a simple summary based on my own understanding. The civil service pension website also has lots of info on AVCs

I know lots of people on UC pay large amounts in to their DC pensions to reduce their actual income and maximise their UC claim (It irrationally annoys me although they aren't breaking any rules)

I don't know whether you would be able to replicate this with AVC's though.

I doubt it's something the Civil Service would allow as an employer but it's worth investigating further.

Seriously…. You can pay more money into your pension & then subsidise your take home amount with UC. I’m shocked at this.

Well I don't know, hence the post.. as you can imagine ,there is a 'sweet spot' in earning money and claiming UC. There's nompijt anyone no acknowledging that. As it stands, I would take home in total £100 more a month if I worked 37 hours a week than 25 for instance. Would anyone here work 48 hours a month more for an extra £100? Or do I have to be noble because I claim benefits? I dunno.. And I still have my caring stuff to do which is how I found myself here on the fist place on benefits and without a private pension. I am just wary I have very little time to get this pension lark cracking, it's never going to be a lot but it might keep me out of the benefits sector in retirement which surely is a good thing. I wonder if that's why it's possible as a future investment. Basically I am trying to do the right thing here, getting a good job like this with a pension is amazing at my age but I need to find a way of not making myself worse off in reality but want to save as much as possible. It seems to me that Universal Credit is based on net pay and it seemed like good way to keep myself afloat now and into the future. I have children going to Uni etc in a while and I want to make sure they maximise their grant vs. loan situation. It's not their fault I am here either, I had a child with disabilities that meant all career options were crushed for many years. I am just trying to do the right thing by myself and all my children.

People claiming U.C.to top up wages are usually people who have worked as unpaid carers or had disabilities or are doing underpaid jobs or are unable to work more hours, so of course they need to do what works for them and the system is designed (sometimes) to enable that precisely because it's recognised that they've been in positions holding them back from the advantages others might have had.

As a carer, you should have been given N.I. credits towards your state pension, but yes, you can put money into a private pension also as far as I'm aware and it's not counted as income for U.C.. Best check with Citizen's Advice or U.C. to be sure, though.

Do you have any pensions from any previous employment at all?
Do you think you will work until you are 67?
I assume you have protected years so will be entitled to the full state pension.

Roughly what is your salary and the pension you could accrue without overpaying between now and retirement age?

These answers should develop your strategy.

Nope I have zero other pensions to add into the mix but I do have full credits towards a state pension. Really as it stands, if I didn't top up the pension is hardly worth having, yes I'll hopefully work until 67 and this is entry level work so my percentage paid in is about 4.34% or something like that... Their addition to the pot is very generous indeed. I am never going to make anything of this opportunity unless I do put as much in as I can. I appreciate other people's chagrin at this situation that feels like a bit of a gift and I don't mind just having slightly over what I have in benefits now if I can really help myself and my children going forward... This job isn't about the money as such more about doing something for myself (and anyone here who has done long term caring and has had their ability to work and career aspirations removed will know about how rare it is to be able to redress the situation) and being able to pay into a really generous pension (from them). I have been so lucky to even find myself here and I'm sorry if I sound like I'm working the system but I have to do something without making things worse.

Thank you for this. That's exactly where I find myself and appreciate your understanding.

I would do the calculations and work out what is optimal for income for you. I would say though to thoroughly read the ts and cs for your AVCs if you go that route. Some schemes have rules about when you can access them and some have brilliant additions that your lump sum can come from your AVCs and so you are entitled to more pension from your main scheme as they are linked.
The Meaningful Money podcast and YouTube channel with Pete and Roger has some good primers for retirement planning.
Good luck!

In terms of the civil service pension, if this is Alpha then you can effectively ignore the employer ‘contribution’. You will accrue 2.32% of your gross salary every full year you work. So for ease of maths, if you earn £21500 in a year you will get £500 pension pa. Earn that for 10 years and you will get an annual pension of £5000 for life, index linked for life.

You will pay in a % of your gross salary which varies depending how much you earn but the 2.32% figure remains constant. Prior to pension age/pension in payment, whichever is the later, each year there is a readjustment to your accrued benefits but this is less generous than the index linked calculation for a pension in payment.

You can do avcs as PP said but this is a completely separate scheme and scheme type. Added pension or buying extra years (the latter aimed at retiring early I believe) are also available. Sadly added pension calculations changed recently and the scheme is not as generous as it was. In my (unqualified) opinion it is now borderline with an ISA depending on assumptions about life expectancy and whether you are likely to take a lump sum tax free.

i joined the civil service at 53 and pension-wise it was a very sound move.

CAVEAT - the above is just what I have gleaned from reading up. I am not an expert.