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Flexible paying in, flexible paying out

Life isn’t always as simple as we’d like it to be. Some things take us by surprise and those surprises can cost money, so flexibility is important when it comes to saving for the future.

Flexible paying in

You can make regular or lump sum payments into your AVC pot direct from your pay, and you can change them at any time. If you reduce or stop them, it’ll affect how much you eventually have and you’ll still pay charges.

There’s no minimum contribution amount.

Depending on pension allowance limits, you can pay in up to 100% of your pensionable pay each month after deductions such as National Insurance and your main LGPS contributions are taken.

Flexible paying out

You have a number of options to choose from when you decide to take money from your AVC pot, which you can currently do from age 55 (57 from 6 April 2028, unless you have a protected pension age), or possibly earlier if you’re in ill health. These options give you greater choice and control over how and when you retire.

With some of the options, you need to transfer the value of your AVC pot to one or more pension plans outside the LGPS.

Other options are available directly from your AVC pot, but they're subject to your LGPS rules. This means that you may have to take your main LGPS benefits at the same time.

  • Take your whole AVC pot as a 100% tax-free lump sum

You can take your whole AVC pot as a 100% tax-free lump sum. This is only possible if you take your main LGPS benefits at the same time. The total tax-free lump sum you take can't be more than 25% of the total value of the LGPS benefits you take at that time. This includes any LGPS lump sum and your AVC pot and is subject to overall HM Revenue & Customs limits. Your LGPS scheme administrator will help you work out what you can take at the time.

  • Get a guaranteed income for life

You can buy an annuity - it pays you an income (a bit like a salary) and is guaranteed for life. These payments may be subject to income tax. In most cases you can take 25% of the money in cash, tax-free. You'll need to do this at the start and take the rest as income. You must normally take your LGPS benefits at the same time.

  • Get a tax-free lump sum and more LGPS pension

You can usually take up to 25% as a tax-free lump sum and use the rest to give you more LGPS pension. This is only possible if you take your main LGPS benefits at the same time.

  • Take your cash in stages - Scotland only

You can leave the money in your AVC pot and take out cash lump sums whenever you need to - until it's all gone or you decide to do something else. You decide when and how much to take out. Every time you take money from your AVC pot, the first 25% is usually tax-free and the rest may be subject to income tax. You can't take your main LGPS benefits at the time you take this option.

  • Take more than one option

You can normally mix and match the above options as long as you're eligible for those options.

  • Take flexible cash or income

You can do this by moving your money into a drawdown plan. In most cases you can take up to 25% of your money tax-free, you'll need to do this at the start. You can then dip in and out when you like or take a regular income. This may be subject to income tax.

  • Take your cash in stages

    You can normally transfer your AVC pot into a new pension plan and take one or more cash withdrawals from it until your money runs out or you choose another option. You decide when and how much to take out. Each time you take a lump sum, 25% is tax-free and the rest may be subject to income tax. If you have sufficient money in your plan, you may be able to buy a guaranteed income for life or a flexible retirement income.

You might be able to take your benefits earlier than age 55 if you’re in ill health. 

Regardless of your age, if you have a life expectancy of less than one year due to ill health, you may be able to take your pension pot tax-free. 

For more information, please contact us.

 Important information

  • The tax you pay will depend on your circumstances. Rules can also change.
  • Where you take benefits directly from your AVC pot, the options available to you are determined by LGPS scheme rules. You may need to draw your main LGPS benefits at the same time in order to access them.
  • There are specific rules which apply to flexible retirement. Your scheme administrator can tell you whether/how you can take your AVC benefits if you flexibly retire.
  • Although pension rules may change in the future, your LGPS administrator will write to you with the options available to you as you approach retirement.
  • You must take your AVC benefits or transfer to another pension arrangement by age 75. You can normally transfer your AVC pot to one or more pension arrangements at any time, as long as you've stopped your contributions.
  • Whatever you decide to do, you should shop around and find what’s best for you. You don’t have to stay with us. Different providers offer different products, some of which may be more appropriate for your individual needs and circumstances.
  • If you're thinking of transferring to another plan, you should get guidance or financial advice to help you with this decision.

Pension Wise

Pension Wise is a free, impartial guidance service available to those aged 50 and over. It's offered by the Government to help you understand your options at retirement. You can find out more at moneyhelper.org.uk/pensionwise or by calling 0800 280 8880 to book a phone or face-to-face appointment. We recommend that you use this service to help you understand your options.

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"Prudential" is a trading name of Prudential Distribution Limited. Prudential Distribution Limited is registered in Scotland. Registered Office at 5 Central Way, Kildean Business Park, Stirling, FK8 1FT. Registered number SC212640. Authorised and regulated by the Financial Conduct Authority. Prudential Distribution Limited is part of the same corporate group as the Prudential Assurance Company Limited. The Prudential Assurance Company Limited and Prudential Distribution Limited are direct/indirect subsidiaries of M&G plc, a company incorporated in the United Kingdom. These companies are not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America or Prudential plc, an international group incorporated in the United Kingdom.