AVC....Is this right

[Hawkey99]

Had a meeting with the government Pensionwise person yesterday.

He was adamant that I would have to pay tax on my AVCs even though I explained 25% of my total pension pot would be tax free.

He was clear that they would be separated and that only 25% of the pension pot and separately 25% of the AVCs are tax free.

I still think he is wrong but am no longer sure.

Any thoughts ??

Thanks

[RobertT]

Some company pension schemes allow members to combine the value of the main scheme benefits with AVC’s, while others don’t. RM do allow it!

In the ‘guide to AVC’s’ on the plan website it clearly says:

When you take your pension benefits you can use your AVC account to take a tax-free cash lump sum (up to a total cash lump sum of 25% of the total value of your main Royal Mail Pension Plan benefits and AVC plan benefits combined).

* Although it is possible to take your AVC funds separately from the main benefits if you chose to do so, in which case only 25% would be tax free with the rest being treated as taxable income in the normal way.

As a side note, Pension Wise was set up to specifically help people with DC schemes, so I wouldn’t have thought they were necessarily the best place to go for advice on your DB scheme. Although I would expect any pension advisor to know that treatment of AVC funds can vary from one employers scheme to another - that's one of the basics!