AVC question

[casp21]

If I wanted to put a VR lump sum into my pension via AVC for tax purposes, do I have to do it through Royal Mail AVC or can I pick a different one that might perform better, outside of Royal Mail. Thanks.

[RobertT]

There is no reason why you cannot put your VR money into an external pension completely separate from RM. In practice you would initially pay tax on the amount over £30k and then get that tax back when you put it in the pension, in the form of ‘tax relief’.

The advantage of doing that is that you can take it whenever you want from age 55, whereas the RM AVC option normally has to be taken at the same time as your main RM pension.

The disadvantage is because it’s totally separate from RM and you won’t be able to use it to fund your tax free lump sum, as mentioned in another of your threads. And you’re more likely to have to pay tax on it when withdrawing it, although that would depend on your total income at the time.

[casp21]

Thanks again Robert. i have about six weeks to decide. I think putting the money with another company its called a SIPP, but more or less the same regarding tax relief. I find out a little bit more every day, but would agree with you, because I am getting a Royal Mail pension, in the end I would prefer to put it into something that will give me a lump sum instead of a yearly pension, which SIPP's seem to gear towards.

[RobertT]

You could put your money into either a stakeholder pension, personal pension or a self invested personal pension (SIPP).

A brief summary of the differences can be found here:
http://www.which.co.uk/money/retirement ... -pensions/" onclick="window.open(this.href);return false;

In my opinion a SIPP is only really suitable for experienced investors who know what they’re doing with shares, etc. So if you don't choose the AVC, a personal or stakeholder pension may be the better option.

[casp21]

Thanks Robert, probably not a serious investor seeing that I can't even work out my pension, so probably best sticking to the AVC.

[N1-22postman]

I am 63 and took VR this tax year and retired with my NRA60 pension of £9300 as my only income.The maximum gross amount you can invest into all your pensions is equal to your total amount of earned income in a tax year.Only the the part of your VR over £30K counts as earned income as that is the only bit that gets taxed.So the first £30K of VR will not get tax relief if put in a pension.If you are over 55 from next year you can take cash from your personal pension as and when you like although beware of taking a large amount in one go because this withdrawal is taxable and it could put you into the higher tax rate of 40%.So if you took VR in 6 weeks and retired, your earned income for 2015-2016 would not amount to much and you would only be able to put a little more than the part of your VR over £30K into a personal pension (your Royal Mail pension does not count as earned income).I retired in April 2014 and my only earned income was the VR lump sum over £30K and I put this in a Fidelity Sipp which has low charges and will allow me to take a small cash lump sum each tax year to get me up to my personal tax allowance and so I hope to avoid paying any tax on my withdrawals.What you invest in the Sipp depends on your attitude to risk and what state your finances are in but tracker funds have very low charges and one that uses a mix of trackers is Vanguard Lifestategy which ranges from a low risk 20% fund up to a high risk 100% fund. http://www.moneysavingexpert.com" onclick="window.open(this.href);return false; has a very good forums on saving and investment, and pensions if you want to know more.

[casp21]

That's great advice and i will look into all if it. Thank you.