LGR and new AVCs

[massivestress]

I’m mid 50s and decided (as I have no savings) to start a shared AVC as I work for a local council. I’ve applied but with LGR I’m thinking my job might not be safe and making a year or two of contributions is pointless? I know there’s a tax saving but should I do my shares ISA instead?

Have a look for the Financial Flow Chart, I can’t link but it is easily found. It sets out the steps to take for financial security. It’s really helpful as to is it best to save in an ISA or a pension or pay off the mortgage.

Thank you, that’s useful , I had a quick look. I’m specifically concerned about LGR and job stability, wondering if others are the same?

Pension= tax saving on way in but taxed on way out
ISA = taxed on way in but tax free to take out

Don't know about LGR. Are AVCs defined contribution or defined benefit? Salary sacrifice so you save NI? If DC would you be able to transfer the money to another pension provider or is it 'stuck'?

ISA is more flexible and can be accessed before 55/57 or your minimum pension age. If you are a basic rate taxpayer then would probably use ISA for the flexibility. There are several that don't charge platform fees. If you want an established name Barclays is now free and others that are free for monthly investment e.g.Scottish widows (part of Lloyds).

Third option would be to set up a SIPP. You still get tax relief e.g. pay in £80 and £20 is added so you have £100 to invest but is not tied to your employer. There are special rules for small pension funds which may apply to you.

The minimum age to access a pension is rising from 55 to 57 in 2028 so when you can access it will depend on how old you are.

LGR is reorganisation so potentially I may be made redundant. The AVC is salary sacrifice and tied up til retirement. I’m just a bit worried that I set it up and then it’s tied up for years of if I lose my job.

If you are worried about redundancy then have 6 months of normal expenditure in easily accessible savings. Any extra could go in S&S ISA but you really want to be able to invest for 5+ years. Salary sacrifice gives the NI saving as well so a bit better than a SIPP but if the money isn't accessible when you need it then may not be worthwhile.

Thanks - the issue is with LGR I don’t know if I will have a job, so is it the right time to set up an AVC (with all the benefits of that) as it may end up tied up without being able to contribute further.
im torn between it being a really good deal but a bit risky right now

Ho OP - lots to consider. Are you aware that if you work for local government and are made redundant age 55 and over that your lgps pension is immediately payable to the full value without early reduction for age and not tied to standard NPA, (normal pension age)? In a redundancy scenario you must take the AVC at the same time as your lgps pension or transfer to a defined contribution pension.
You can chose to take the AVC entirely tax free at the point of redundancy (check limits as it's based on a formula including the value of your nominal 'pot'). If you are likely to be 55 or above when redundancy may occur then it could be very beneficial to save into an AVC as it will receive tax relief on the way in and can be drawn tax free on the way out, therefore surpassing the benefits of an ISA in that scenario. It doesn't trigger the MPAA either so you can continue to contribute to a defined contribution pension in future. This is a very niche scenario though and depends entirely on your projected age at the point of redundancy so check whether this fits your circumstances.

Hi @MumofCandR thank you, that’s missing info so I think it’s convinced me to do this. The tax saving is just too positive to miss out on.