Taking AVC

[jchewitt1967]

Hi everyone, I'm in the process of taking my entire pension early, I've also got an AVC fund . When I received my pension quote it didn't reference my AVC. I've now returned the paperwork to signal my intentions, at what point can I access my AVC and do I have to initiate this or will pensions do this on my behalf? One final question, can I take my AVC fund in total ( tax implications accepted)? Thanks .

[postie2007]

Hi,
You will receive another letter soon which should include AVC figures 25% can be taken tax free, the letter will detail what you could do with the remaining sum.

[jchewitt1967]

Thanks for the reply , I'm hoping after the 25% tax free I can take the rest of the AVC pot ( obviously paying more tax ).

[RobertT]

Hi everyone, I'm in the process of taking my entire pension early, I've also got an AVC fund . When I received my pension quote it didn't reference my AVC. I've now returned the paperwork to signal my intentions, at what point can I access my AVC and do I have to initiate this or will pensions do this on my behalf? One final question, can I take my AVC fund in total ( tax implications accepted)? Thanks .

You've pm'd me with this question and here is my reply for others to see:

A few years ago, I asked the PSC in Sheffield whether I could transfer out any excess Flexiplan AVC's for drawdown, and was given the following reply.
I believe your situation may not be exactly the same, but your options may well be very similar.

The reply I got is as follows:

Under current legislation, if you did have excess AVC's at the time of activating your main scheme benefits, the option of transferring your excess amount of AVC's to another pension arrangement for drawdown is not allowed. You would be able to have a taxable lump sum which would be taxed under PAYE principles, purchase an annuity if the amount is over £1,000, or commute the remaining excess to pension if it's less than £1,000.

You are able to transfer the whole value of your Flexiplan AVC funds to an external pension provider registered the HMRC who may provide flexible benefits. Partial transfers are not allowed.

Going by that, you can do as you want and take the excess AVC amount as taxable cash.

[jchewitt1967]

Thanks for the reply , it give me something to go on .

[jchewitt1967]

Thanks for the reply , it give me something to go on .

[mr hil.]

A question I have pondered and may be of relevance to you is .......

If you take the remaining 75% of your AVC as cash after the 25% tax free does it count as income for the tax year and could it push you into a higher tax bracket if you have a large enough balance?

Just something I need to know for myself but could be of interest to you . Any Experts on here that could advise please

[RobertT]

A question I have pondered and may be of relevance to you is .......

If you take the remaining 75% of your AVC as cash after the 25% tax free does it count as income for the tax year and could it push you into a higher tax bracket if you have a large enough balance?

Just something I need to know for myself but could be of interest to you . Any Experts on here that could advise please

Yes, any excess AVC money taken with your NRA60/65 over and above the 25% tax free amount, will count as income and be taxed accordingly, and the same goes for the DBCBS.

So anyone with a total taxable income of over £50,270 in any financial year will pay tax at 40% on anything over that amount.

A way around that, would be to do what I'm planning and what Hawkey99 has already done!

Use your AVC's to fund the maximum tax free lump sum with NRA60, but defer the excess. Then transfer out that excess to a personal pension for drawdown(over a period of time) sometime before taking NRA65.
It won't enable you to avoid paying tax, but it should stop any possibility of paying it at 40%.

The important difference to enable a transfer out for drawdown, is that it needs to be a separate thing to taking your pension.

More info on what you can do with your AVC's can be found in the 'guide to AVC's' on the RMPP website: https://www.royalmailpensionplan.co.uk/ ... -benefits/