AVCs vs SIPP

Alexei · Post by **Alexei** » 01 Jun 2018, 16:57

Currently paying AVCs into both Bonusplan and Flexiplan, although after a bit of reading, been thinking of dropping Flexiplan in favour of a SIPP, as there is no employer contribution.

Does anyone have a similar setup, and care to part with some knowledge? Not looking for financial advice, but a greater understanding.

Also, what is the standard employer contribution at the minute for members of section C? I'm paying £21.62 pw and can't remember how to work out employers contribution.

Post by **RobertT** » 01 Jun 2018, 17:15

Personally I have Bonusplan, Flexiplan and now the DBCBS to provide tax free cash when taking my main RM pension benefits at 60 & 65.

I also have a personal pension(I don't really feel the need to have thousands of investment choices with a SIPP), to fund early retirement before 60.

I would say the main reason for opting for a separate pension would be flexibility, but the downside is you won't get salary sacrifice(PSE), which is a nice extra benefit.

RM currently pay 13.6% to your 6% into the DBCBS. So they're paying in around £49.00 per week.

Alexei · Post by **Alexei** » 01 Jun 2018, 18:31

RobertT wrote:Personally I have Bonusplan, Flexiplan and now the DBCBS to provide tax free cash when taking my main RM pension benefits at 60 & 65.

I also have a personal pension(I don't really feel the need to have thousands of investment choices with a SIPP), to fund early retirement before 60.

I would say the main reason for opting for a separate pension would be flexibility, but the downside is you won't get salary sacrifice(PSE), which is a nice extra benefit.

RM currently pay 13.6% to your 6% into the DBCBS. So they're paying in around £49.00 per week.

Thanks for the reply.

Having recently opened a S&S ISA, I was suggested a SIPP. Obviously the employer contribution is beneficial, but as you know, Flexiplan doesn't have this, which is why I was pandering on switching my Flexiplan contributions to a SIPP. Wider fund choices are appealing but not a necessity for me. I like the idea of being in control, but is rather daunting for the mere rookie investor! I understand the salary sacrafice part, but wouldn't this be equal to the government providing 20% tax relief towards a SIPP?

Post by **RobertT** » 01 Jun 2018, 19:01

The main aim of AVC's is to fund the tax free lump sum when taking your NRA60/65 benefits and that is usually when you'll get their full benefit. You can take them independently of the RMPP from age 55 but only 25% is guaranteed to be tax free, with the rest classed a income. The same tax situation applies to SIPP's.

ISA's have there place and I also have both cash & S&S versions. They are flexible but although there's no tax to pay when taking the money out, your contributions will have come from your net pay, and so already taxed.

Your main RM pension contributions and your AVC's benefit from tax relief and PSE, meaning you only have to pay a net amount of £6.80 to get that grossed up to £10. In practice that means you'd pay £2 less income tax and £1.20 less NIC's.

SIPP's etc benefit from tax relief only, meaning you would have to pay a net amount of £8 to get the same £10 gross.

Alexei · Post by **Alexei** » 01 Jun 2018, 19:16

Thanks Robert, cleared up things pretty well

I thought section C of RMPP didn't have a lump sum and AVCs were used to provide this, but a colleague told me everyone is entitled to a lump sum. Care to shine a light?

Post by **RobertT** » 02 Jun 2018, 04:00

Section C members don't get a lump sum as standard, but have the option to commute some pension to get one.

AVC's and the now the DBCBS, mean you could get full pension and lump sum.