LGPS Money Purchase Annual Allowance & AVC

Wentthedaywell? wrote: »

Really Alan? I'm totally confused to be honest! That's why I'm resorting to this thread, to get a definitive yes or no to saving <£4 pa.

I thought the MPAA and the 25% LGPS AVC rules were two separate things? So I could be within the AVC limit, but still have etc pay tax on contributions because I have already withdrawn money this year. I really am floundering!

They are separate - MPAA limits what investment you can make into a Money Purchase scheme and attract tax relief once you have accessed a previous money purchase scheme.

So what you can't do is take £20k out of a DC/Money Purchase/AVC scheme and reinvest it all in another DC/Money Purchase/AVC scheme, only £4k of it can go in during each tax year.

Whether withdrawing from the new pot would incur a tax bill would be down to scheme rules and HMRC rules.

With the LGPS AVC, as it can be taken tax free up to the 25% overall pot limit you are aware of, then I would have THOUGHT that meant you can withdraw it in a year or so's time tax free when you start your "2nd LGPS pension".

As suggested the scheme admin staff may be able to answer although in my experience they have limited exposure to the AVC side of things as so few LGPS members are in it as far as I am aware - at least very few where I work and where my wife works.

When I had a query which I thought was being answered incorrectly by the local staff I checked it out on the main, national LGPS website and referred the local staff to the information I found.

I can understand your confusion about this, the more I read from the helpful links supplied by other posters the more confusing it appears.

From the 2nd link xylophone posted I found this statement as well as those that he has already quoted in Post 7 and repeated here for ease of reading:

Events Triggering the MPAA

The MPAA applies for the tax year in which an individual first flexibly accesses money purchase benefits, and for all subsequent tax years.

Events which trigger the MPAA include flexibly accessing money purchase savings:

as a one-off payment by taking an uncrystallised funds pension lump sum.
through a flexi-access drawdown fund, where the first income drawdown from the arrangement occurs on or after 6 April 2015.

Money purchase savings include both defined contribution arrangements and the majority of additional voluntary contribution (AVC) facilities operated by defined benefit pension schemes.

Receipt of a tax-free lump sum (pension commencement lump sum) is not a trigger event, neither is the designation of the funds into a flexi-access drawdown fund.



All of these statements make sense on their own in the context of a "standard" money purchase pension including many AVC schemes where you would take 25% tax free and take the rest as taxable income.

The first part (25% tax free lump sum) does not trigger the MPAA but the second part (taking anything at all from the remaining 75%) would trigger it.

However, if your scheme allows the AVC to be taken in its entirety as the tax free PCLS which one applies?

Be interested to see what answers you get.