AVC excess

rollsnoyce · Post by **rollsnoyce** » 29 Jul 2018, 15:40

Hi Can anybody tell me my options for a excess AVC amount of around £7000 I have after taking my 60/65 benefits recently. Thanks

Post by **NorthernBoy** » 29 Jul 2018, 16:02

I believe you can transfer your £7k to a provider that offers pension drawdown and then draw 25% tax free. The remainder would then be taxed at your tax rate when you draw it down.

Post by **RobertT** » 29 Jul 2018, 17:19

My understanding is that you should have a number of options:

1. Take it as cash but pay tax on all of it.
2. Transfer to another provider and buy an annuity, in which case it would be classed as earned income and potentially taxed depending on your other income.
3. Transfer to another provider and go into drawdown, in which case it would also be classed as earned income and potentially taxed depending on your other income.
4. Defer doing anything with it until a later date, when perhaps the your tax liabilities might be lower.

As far as I know, you can't automatically take another 25% of it tax free because you've presumably already used up your maximum tax free amount from your AVC's when you took your pension.

The current rate of the Personal Tax Allowance is £11,850, so any income in any one financial year above that figure will be taxed.

I believe RM's preferred provider in this scenario is Hargreaves Lansdown, but you can also transfer to another provider of your choice.

Hawkey99 · Post by **Hawkey99** » 29 Jul 2018, 21:52

So how did you get notified of the fact that you had £7000 excess AVC.

Did you quote say exactly what pension and AVC you could take.

Thanks

rollsnoyce · Post by **rollsnoyce** » 29 Jul 2018, 23:13

Hi the excess was on option 1A of the 65 benefits.

rollsnoyce · Post by **rollsnoyce** » 29 Jul 2018, 23:15

Thanks guys for the info.

NWpostie · Post by **NWpostie** » 30 Jul 2018, 16:11

I've wondered about that as I've just recently put aside £100 a week toward an AVC growth plan with Zurich with the expectation that in 10 years time it will accrue enough for a decent lump sum and an additional pension on top of my RM pension.

Do they all get taken into consideration in one pot RM pension and ZURICH AVC when deciding to take it, the AVC becoming the 25% tax free ?

The bigger the pot, the bigger the 25% proportion is going to be ?

Post by **NorthernBoy** » 30 Jul 2018, 19:31

NWpostie wrote:I've wondered about that as I've just recently put aside £100 a week toward an AVC growth plan with Zurich with the expectation that in 10 years time it will accrue enough for a decent lump sum and an additional pension on top of my RM pension.

Do they all get taken into consideration in one pot RM pension and ZURICH AVC when deciding to take it, the AVC becoming the 25% tax free ?

The bigger the pot, the bigger the 25% proportion is going to be ?

Following on from this does anyone know what the calculation method is for pension pot size for section c members?

I have seen something for section b that says yearly pension x 20 + lump sum = total pot size.

Do the same rules apply for section c with the set lump sump replaced by a members avcs (should they have any) and then divided by 25% to get the max amount that can be taken as a lump sum.

Thanks.

Post by **RobertT** » 30 Jul 2018, 19:39

NWpostie wrote:I've wondered about that as I've just recently put aside £100 a week toward an AVC growth plan with Zurich with the expectation that in 10 years time it will accrue enough for a decent lump sum and an additional pension on top of my RM pension.

Do they all get taken into consideration in one pot RM pension and ZURICH AVC when deciding to take it, the AVC becoming the 25% tax free ?

The bigger the pot, the bigger the 25% proportion is going to be ?

Yes.

If, for example you're in section C and your pension is £6,000 per year then a quick way of working out it's value is by multiplying by 20.Which gives you £120,000 and so a maximum tax free lump sum of £30,000(25%), but you'd have to give up some pension to get that lump sum.

But if you also have £30,000 in AVC's(bearing in mind the DBCBS is effectively an AVC aswell), then you have a pot value of £150,000 and a max lump sum of £37,500. You have the option to take a smaller percentage lump sum if you want, so in this example you could just take the £30k and keep the maximum pension, which is a valuable thing to have!

My advice is do your maths at regular intervals along the way and try and make sure your AVC's equal 25% of your total pot when you come to draw your pension/s. Anything over is likely to cause hassle and you'll possibly lose some of it to the tax man too!

NWpostie · Post by **NWpostie** » 30 Jul 2018, 21:19

RobertT wrote:
NWpostie wrote:I've wondered about that as I've just recently put aside £100 a week toward an AVC growth plan with Zurich with the expectation that in 10 years time it will accrue enough for a decent lump sum and an additional pension on top of my RM pension.

Do they all get taken into consideration in one pot RM pension and ZURICH AVC when deciding to take it, the AVC becoming the 25% tax free ?

The bigger the pot, the bigger the 25% proportion is going to be ?
Yes.

If, for example you're in section C and your pension is £6,000 per year then a quick way of working out it's value is by multiplying by 20.Which gives you £120,000 and so a maximum tax free lump sum of £30,000(25%), but you'd have to give up some pension to get that lump sum.

But if you also have £30,000 in AVC's(bearing in mind the DBCBS is effectively an AVC aswell), then you have a pot value of £150,000 and a max lump sum of £37,500. You have the option to take a smaller percentage lump sum if you want, so in this example you could just take the £30k and keep the maximum pension, which is a valuable thing to have!

My advice is do your maths at regular intervals along the way and try and make sure your AVC's equal 25% of your total pot when you come to draw your pension/s. Anything over is likely to cause hassle and you'll possibly lose some of it to the tax man too!

I regularly check my AVC account to see how much its building up. I was hoping that the bigger the pot the bigger my 25% portion is going to be and if there is an excess left over covert it into another pension in addition to my RM pension, some of it 21 years is final salary and the rest is Defined Benefit, now I've got another 10 years of CDC plan assuming that going to come about.

I plan to retire at 60 and as my birthday is before April, I'm thinking of deferring retirement until after 1st April as the pension benefit gets increased every April.

What you think of that plan ? RobertT ?

Post by **RobertT** » 31 Jul 2018, 05:09

NWpostie wrote:I regularly check my AVC account to see how much its building up. I was hoping that the bigger the pot the bigger my 25% portion is going to be and if there is an excess left over covert it into another pension in addition to my RM pension, some of it 21 years is final salary and the rest is Defined Benefit, now I've got another 10 years of CDC plan assuming that going to come about.

I plan to retire at 60 and as my birthday is before April, I'm thinking of deferring retirement until after 1st April as the pension benefit gets increased every April.

What you think of that plan ? RobertT ?

If you have 21 years of final salary(up to 2008) you'll have 10 years of CARE/CSDB and so you started in 1987? So are you in section B or C? If it's B then you're AVC's can be used slightly differently:

Section B gives you a lump sum as standard but with the ability to give up some or all of it to provide more pension. So if you build up enough in AVC's to fund the 25% tax free lump sum, you get the best of both worlds – a higher index linked income for life plus the max lump sum.

If you're in section C and buy an annuity with your excess after you've taken your tax free cash, then the pension you get from that is likely to be a lot less than section B members who commute their standard lump sum.

NWpostie · Post by **NWpostie** » 31 Jul 2018, 10:22

Yep section C, I missed out by a few months.

Post by **RobertT** » 31 Jul 2018, 19:07

NWpostie wrote:Yep section C, I missed out by a few months.

Me too!

Yamr1 · Post by **Yamr1** » 31 Jul 2018, 19:15

Started 1992 what section am i ?
Sorry just starting to figure this out must be a age thing .
As getting older etc
Don't shoot me down etc
When your younger you never worry about this stuff.
P.s don't shoot me down again AVC so if a pay extra now and get to 60 and don't touch my lump sum i need to try get avcs up to about the 35G mark ????
P.s need help not clued up on this

Post by **RobertT** » 31 Jul 2018, 19:18

Yamr1 wrote:Started 1992 what section am i ?
Sorry just starting to figure this out must be a age thing .
As getting older etc

You're in section C!