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SSAVC as lump sum in LGPS

DrFfybes
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SSAVC as lump sum in LGPS

#489545

Postby DrFfybes » March 27th, 2022, 3:46 pm

MrsF is still working, part time, and in the LGPS. As she is now on the Career Average scheme, there is no lump sum accrued.

She also has a SSAVC running with Pru, with the intention of taking this as a lump sum. It was touted as being tax free, but I have my doubts.

Does the "25% of pension pot" rule apply to tax free cash in this situation?

Say MrsF earns £10k in her part time role, the pension accumulates at 50ths, so £200/annum for each year worked. I gather for tax calcs the value of the DB pot is 20x the benefits, so 'accrues' £4k for each year she worked. If she does SSAVC of £200/month = 2400/annum,that brings the pension pot to £6400 after 1 year.
Am I correct in thinking only £1600 of the AVC would be tax free, or would it be 25% of the DB pot only, or something else?

She is already in receipt of an older LGPS scheme contributed from 1980s - circa 2015, if that has any impact.

thanks
Paul

[Edited for spelling]

Sobraon
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Re: SSAVC as lump sum in LGPS

#489574

Postby Sobraon » March 27th, 2022, 6:44 pm

Mrs S has a similar set up with the aim that the LGPS linked PRU AVC plan will be equal to or less than 25% of the total value of her LGPS benefits, including the linked PRU AVC plan. This is to ensure that her tax free PCLS can 'use up' 100% of the value of the linked PRU AVC plan.

However, I would email the LGPS administration for her particular authority scheme and get it 'screwed down'. The 'federated' nature of the LGPS means that things can and do get overlooked and may I suggest you check everything with them in writing.

DrFfybes
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Re: SSAVC as lump sum in LGPS

#491233

Postby DrFfybes » April 3rd, 2022, 1:47 pm

Sobraon wrote:Mrs S has a similar set up with the aim that the LGPS linked PRU AVC plan will be equal to or less than 25% of the total value of her LGPS benefits, including the linked PRU AVC plan. This is to ensure that her tax free PCLS can 'use up' 100% of the value of the linked PRU AVC plan.

However, I would email the LGPS administration for her particular authority scheme and get it 'screwed down'.


Thanks - at least your thinking is along the same lines re the tax free sum. It is very easy to 'overpay' into the Pru plan and get over the 25% of total pot, something that was not clarified. Even if she is slightly over then she'll only pay at 20% compared to the 40% relief going in (and there's NI relief).

Paul


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