Transferring AVC Funds

[Hawkey99]

I know that in some circumstances you are able to transfer your AVC funds to another pension provider.

I wondered if anybody on here had actually done that and how it had gone.

Also where can you transfer it to. I have a SIPP with AJ Bell which I would like to transfer it to and wondered if that is possible. Also as its over 50k would there be any hoops to jump through as there are when you transfer a DB pension over 30k.

Any thoughts?

Many thanks

[RobertT]

I haven't transferred any of my AVC's but I do plan to do so in due course.

AVC's can be transferred to another DC pension arrangement, which would include a SIPP.

The only possible issue might be if you're transferring into a SIPP that you've already accessed, and therefore you could have crystallised and un-crystallised cash in the same pot. Could get a bit messy?

I haven't got a clue about time frames, but knowing RM it probably won't be as quick as it might be.

The £30k advice stipulation only applies when transferring DB to DC. You can transfer as much as you want from DC to DC, and AVC's(Bonusplan & Flexiplan) are DC.

I was told by the PSC that it's only possible to transfer the whole balance, you can't just transfer an x amount and leave the rest in your AVC's. Although if you first use the AVC's to fund the tax free lump sum when taking NRA60/65 benefits, you can then transfer the remainder.

Flexiplan and Bonusplan can be treated as two separate accounts, so you could transfer one but not the other.

[Hawkey99]

Thank you Robert very much.

Its amazing that just by transferring mine out to another provider and taking a small amount each month I will only pay the 20% tax where as if I left it with Royal Mail I would have hit the higher tax band.

I assume this money is also applicable the 25% tax free when drawn down?

[RobertT]

Thank you Robert very much.

Its amazing that just by transferring mine out to another provider and taking a small amount each month I will only pay the 20% tax where as if I left it with Royal Mail I would have hit the higher tax band.

As a general rule, most people are probably better off taking their AVC's as lump sums alongside their NRA60/65 benefits.
But the more you have in AVC's, the more likely tax is to be an issue, particularly once the NRA60 lump sum has been taken. So transferring out any excess after taking NRA60 can work out to be the better choice for some, especially when factoring in the DBCBS which is attached to the NRA65 and can make up 25% of the tax free allowance alone.

I assume this money is also applicable the 25% tax free when drawn down?

Drawdown can mean slightly different things to different people, but these are the 2 ways most people mean when they say drawdown:

Drawdown – take up to 25% tax free upfront in one lump sum, with each withdrawal afterwards being taxed accordingly. https://www.moneyhelper.org.uk/en/pensi ... n-drawdown

UFPLS – 25% of each withdrawal is tax free with the remainder being taxed accordingly. https://www.moneyhelper.org.uk/en/pensi ... -lump-sums

[vmaxv4]

Thank you Robert very much.

Its amazing that just by transferring mine out to another provider and taking a small amount each month I will only pay the 20% tax where as if I left it with Royal Mail I would have hit the higher tax band.

As a general rule, most people are probably better off taking their AVC's as lump sums alongside their NRA60/65 benefits.
But the more you have in AVC's, the more likely tax is to be an issue, particularly once the NRA60 lump sum has been taken. So transferring out any excess after taking NRA60 can work out to be the better choice for some, especially when factoring in the DBCBS which is attached to the NRA65 and can make up 25% of the tax free allowance alone.

I assume this money is also applicable the 25% tax free when drawn down?

Drawdown can mean slightly different things to different people, but these are the 2 ways most people mean when they say drawdown:

Drawdown – take up to 25% tax free upfront in one lump sum, with each withdrawal afterwards being taxed accordingly. https://www.moneyhelper.org.uk/en/pensi ... n-drawdown

UFPLS – 25% of each withdrawal is tax free with the remainder being taxed accordingly. https://www.moneyhelper.org.uk/en/pensi ... -lump-sums

Pensions Option Calculator from Scottish Widows here
https://extranet.secure.scottishwidows. ... calculator
If you select the option at the bottom for “See your detailed results”
You’ll be able to see Options for Annuity, Drawdown etc

[RobertT]

That's a useful tool, thanks for sharing.

There's obviously a few changeable variables to consider, such as:

1. Annuity rates at the time, the type you buy and the fact you can shop around for better rates.
2. How your money will be invested in your drawdown product and how long you draw it down for.
3. Other income.
4. Tax rates.

As ever with pensions, these things will always come down to personal circumstances, etc.

[NorthernBoy]

I know that in some circumstances you are able to transfer your AVC funds to another pension provider.

I wondered if anybody on here had actually done that and how it had gone.

Also where can you transfer it to. I have a SIPP with AJ Bell which I would like to transfer it to and wondered if that is possible. Also as its over 50k would there be any hoops to jump through as there are when you transfer a DB pension over 30k.

Any thoughts?

Many thanks

Why would you transfer out, when you can take all of the AVC funds tax feee from the RM scheme (subject to pension x 20 rule). In a sipp you can take 25% tax free but will be taxed on the rest assuming you are over your tax free allowance.

Just curious as to how transferring out benefits you.

[NorthernBoy]

I know that in some circumstances you are able to transfer your AVC funds to another pension provider.

I wondered if anybody on here had actually done that and how it had gone.

Also where can you transfer it to. I have a SIPP with AJ Bell which I would like to transfer it to and wondered if that is possible. Also as its over 50k would there be any hoops to jump through as there are when you transfer a DB pension over 30k.

Any thoughts?

Many thanks

Why would you transfer out to your sipp, when you can take all of the AVC funds tax feee from the RM scheme (subject to pension x 20 rule). In a sipp you can take 25% tax free but will be taxed on the rest assuming you are over your tax free allowance.

Just curious as to how transferring out benefits you.

[RobertT]

I know I'm hijacking things a bit here, and I'm sure Hawkey99 will correct me if I'm wrong, but my understanding of his situation is:

He has already taken his NRA60 along with the 25% tax free lump sum from his AVC's, meaning what he's left with is his NRA65, DBCBS and excess AVC's to quite a high value.

The way things are worked out is that when he takes his NRA65, that is deemed to be 75% of his NRA65 pot value, meaning the other 25% is the tax free element.

The DBCBS will form the majority of that 25%, so most of the excess AVC's will be paid out as a UFPLS, of which the first 25% will be tax free and the remainder classed as income and taxed under normal PAYE rules.

Bearing in mind the DBCBS is attached to 2012-2018 benefits and NRA65 relates to 2010-2018.

From his posts, I think he has an income of at least the Personal Tax Allowance, therefore he has the choice of:

Taking most of his AVC's as a UFPLS with his NRA65 and paying a certain amount of tax in one go, some of which may be at the higher 40% rate; or
Transferring out, taking the 25% tax free and drawing down over a longer period of time and staying within the 20% tax band.

Without knowing the exact numbers or his situation, I'm unsure whether it's the correct choice. But I expect to be in a similar position and it's something I'll definitely be looking into when the time comes.

I await Hawkey99 for clarification....

[vmaxv4]

That's a useful tool, thanks for sharing.

There's obviously a few changeable variables to consider, such as:

1. Annuity rates at the time, the type you buy and the fact you can shop around for better rates.
2. How your money will be invested in your drawdown product and how long you draw it down for.
3. Other income.
4. Tax rates.

As ever with pensions, these things will always come down to personal circumstances, etc.

Cheers

[Hawkey99]

Hi Robert,

Yes you are spot on.

The other thing people forget is the NRA 65 is a much smaller pension than the NRA 60.

I have done 34 years, now retired and my NRA 65 figures are RMSPS £1530 RMPP is £4942 including supplement and that is if they are taken at 65.

My DBCBS amount is approx £25k and my AVCs are £70k even after taking a decent amount in my NRA 60

[RobertT]