Going over PSE limit

[linntroika]

Hello
As im heading into my few final years in Royal Mail , im thinking of maximising my AVC contributions . My question is , if i go over the PSE limit - Do i loose the 12%(NI) for the total amount of AVC contribution or do I only loose the 12% for contributions over the PSE threshold
Thanks in advance

[RobertT]

You'll lose the benefit on your entire contribution. So a £1 gross payment will cost you 80p instead of 68p.

[linntroika]

Many thanks as usual Robert

[RobertT]

Also bear in mind that payments into the current AVC's(Bonusplan & Flexiplan) will probably stop when the new CDC scheme is introduced. So if you're going to max them out, to the PSE limit or not, I'd do it asap.

[Yamr1]

What's the chances deep down Robert t do you honestly think of the avcs stopping when new pension starts

[RobertT]

What's the chances deep down Robert t do you honestly think of the avcs stopping when new pension starts

Only employee members of the RMPP, those currently paying into the DBCBS, can pay into Bonusplan and Flexiplan.
I don't see how we can continue to pay into a scheme(the RMPP) that will be closed.

I hope I'm wrong for those people who've based their plans on paying into them and I obviously don't want to set myself up for a fall, but I'm 99% sure payments into AVC's will stop.

What you've built up will still be invested in the investments of your choice and for most people, will still be used to fund the tax free lump sum when taking NRA60/65 benefits.

[mr hil.]

I agree with your assumption RobertT but if they do inform us that ongoing payments will cease we should mount a campaign to allow to continue them. As you have correctly stated, many of us have based our payments on the expectation of being able to fund the tax free lump sum for our NRA60 and NRA65 from our AVC's without having to receive a reduced pension instead.

Pensions are a long term plan and to cut things short I believe is unacceptable, a tweak to rules could allow us to continue paying into the AVC pots if we wish to, especially if the new schemes do not allow any extra payments whilst utilising PSE. I know we may be able to pay an extra percentage into the new cash balance section but this will not be enough to avoid sacrificing some of our pension to get the maximum tax free lump sums because the extra payments are designed to mitigate the losses incurred with the new NRA of 67 of the new scheme which will be reduced for those of us that have only a few years left and will need or want to retire early based on our original pension's NRAs

[heapsy]

If you are full time like me, you will be able to pay £100.88 and stay within PSE. That is what I'm paying right now. That's £98 into Flexi plan, and £2.88 into Bonus plan. Hope that helps. If you are on less hours, then divide those figures by 38 to give you an hourly average. Use the hourly average and multiply that by your own hours. That should give you a good figure. I'm also hoping RobertT is wrong, but he probably isn't. With that in mind, I'm looking at topping up my S&S ISA with the money saved from my AVC contributions. Just a thought.

[linntroika]

Im going to phone Sheffield this week to see the Max i can pay in , not taking any chances because 20% is much better than the current ISA rates

[linntroika]

Robert any idea of timescale we have left - thanks

[Yamr1]

Fingers crossed they keep the avcs Or worst scenario we can fight to keep them,
As you've most mentioned alot of people have been planning and paying into them and have made plans for there retirement age with the avcs running for years to come.

[NWpostie]

If you are full time like me, you will be able to pay £100.88 and stay within PSE. That is what I'm paying right now. That's £98 into Flexi plan, and £2.88 into Bonus plan. Hope that helps. If you are on less hours, then divide those figures by 38 to give you an hourly average. Use the hourly average and multiply that by your own hours. That should give you a good figure. I'm also hoping RobertT is wrong, but he probably isn't. With that in mind, I'm looking at topping up my S&S ISA with the money saved from my AVC contributions. Just a thought.

I'm paying the same, I have a back up plan if the AVC scheme stops so at least I will still build up a lump sum of a sort in case.

Better than nothing.

Important thing for me I have no mortgage and no debt.

[heapsy]

Me too. Best thing that came out of getting divorced.

[RobertT]

Im going to phone Sheffield this week to see the Max i can pay in , not taking any chances because 20% is much better than the current ISA rates

I'm not sure Sheffield will be able to tell you that, so heapy's method is a good one to use!

The attractive thing about pensions is the tax breaks and they are valuable things to lose.

Paying into RM AVC's means getting the benefit of tax relief and PSE, so a £1 gross contribution only costs 68p, which is actually a 47% increase on your money before any interest or investment growth.

Paying into a personal pension means getting just tax relief and a £1 gross payment only costing 80p, which is a 25% increase.

[RobertT]

Robert any idea of timescale we have left - thanks

The Pensions Bill, which includes CDC, still needs to be given Royal Assent and there's no date been set for that yet. But I can't see that taking more than a couple of months from now?

It'll take a while for everything to be set up and a few media reports suggest the second half of 2021 for the RM CDC scheme to start.

My personal guestimate is October/November.