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    • Tom2023
    • By Tom2023 9th Mar 17, 8:49 AM
    • 122Posts
    • 22Thanks
    Tom2023
    AVC fund after retirement
    • #1
    • 9th Mar 17, 8:49 AM
    AVC fund after retirement 9th Mar 17 at 8:49 AM
    Hi

    When I retire and after taking out my 25% tax free lump sum I will still have a few thousand in my AVC fund.

    Do I have to take this money straight away (paying tax on it) or can I take it as I please over a few years?

    Thanks in advance for any advice.
Page 1
    • maximumgardener
    • By maximumgardener 9th Mar 17, 10:21 AM
    • 256 Posts
    • 107 Thanks
    maximumgardener
    • #2
    • 9th Mar 17, 10:21 AM
    • #2
    • 9th Mar 17, 10:21 AM
    you could transfer the funds from your AVC to a personal pension (or SIPP) provider

    then drawdown as you wish
    • CBX1985
    • By CBX1985 9th Mar 17, 2:46 PM
    • 13 Posts
    • 10 Thanks
    CBX1985
    • #3
    • 9th Mar 17, 2:46 PM
    • #3
    • 9th Mar 17, 2:46 PM
    You do not need to take it out in one go, just as you need it; you do not even need to take the 25% all at once, you could phase the tax free cash over each individual withdrawal.
    • AlanP
    • By AlanP 9th Mar 17, 8:49 PM
    • 962 Posts
    • 680 Thanks
    AlanP
    • #4
    • 9th Mar 17, 8:49 PM
    • #4
    • 9th Mar 17, 8:49 PM
    What options does your employer offer for the AVC scheme? Have you checked with their pension admin people or in the scheme (or AVC) information booklet / website?
    • xylophone
    • By xylophone 9th Mar 17, 8:55 PM
    • 23,464 Posts
    • 13,640 Thanks
    xylophone
    • #5
    • 9th Mar 17, 8:55 PM
    • #5
    • 9th Mar 17, 8:55 PM
    Are you saying that your AVC exceeds the PCLS available from your scheme pension?

    See post 12 here

    http://forums.moneysavingexpert.com/showthread.php?p=69798200
    • robin61
    • By robin61 10th Mar 17, 7:17 AM
    • 567 Posts
    • 447 Thanks
    robin61
    • #6
    • 10th Mar 17, 7:17 AM
    • #6
    • 10th Mar 17, 7:17 AM
    Hi

    When I retire and after taking out my 25% tax free lump sum I will still have a few thousand in my AVC fund.

    Do I have to take this money straight away (paying tax on it) or can I take it as I please over a few years?

    Thanks in advance for any advice.
    Originally posted by Tom2023
    If this is linked to a DB company scheme you will probably find there are rules around how you can take any residual AVC payment. For example in the scheme I am in they buy you extra pension in the scheme up to £5k and over £5K you have to buy an annuity in the open market.
    The problem with socialism is that you eventually run out of other people's money.
  • jamesd
    • #7
    • 10th Mar 17, 9:15 AM
    • #7
    • 10th Mar 17, 9:15 AM
    I think that yours also allows you to transfer the excess, probably the better option. Then you could defer your state pension and perhaps that of a spouse for about the same cost but twice the income.
    • greenglide
    • By greenglide 10th Mar 17, 9:25 AM
    • 2,898 Posts
    • 1,868 Thanks
    greenglide
    • #8
    • 10th Mar 17, 9:25 AM
    • #8
    • 10th Mar 17, 9:25 AM
    and mine allowed the excess to be taken as an UFPLS even though this was not actually stated in the plan booklet.

    The booklet stated that I "might" have to take any excess as an annuity which could end up as a tiny amount but in practice I had the option of taking the UFPLS or a transfer to another scheme as well.
    • robin61
    • By robin61 10th Mar 17, 12:22 PM
    • 567 Posts
    • 447 Thanks
    robin61
    • #9
    • 10th Mar 17, 12:22 PM
    • #9
    • 10th Mar 17, 12:22 PM
    I think that yours also allows you to transfer the excess, probably the better option. Then you could defer your state pension and perhaps that of a spouse for about the same cost but twice the income.
    Originally posted by jamesd
    Mine is the BT one James. The only way you are allowed to transfer to another pension like a SIPP is if you transfer the whole AVC. You are unfortunately limited with any residual after you have taken the max TFLS to the 2 options I mentioned. I had a letter from the trustees to confirm this.
    The problem with socialism is that you eventually run out of other people's money.
    • robin61
    • By robin61 10th Mar 17, 1:01 PM
    • 567 Posts
    • 447 Thanks
    robin61
    and mine allowed the excess to be taken as an UFPLS even though this was not actually stated in the plan booklet.

    The booklet stated that I "might" have to take any excess as an annuity which could end up as a tiny amount but in practice I had the option of taking the UFPLS or a transfer to another scheme as well.
    Originally posted by greenglide
    Funny how these schemes seem to vary. The letter I got from the trustees also mentioned a UFPLS at first I thought they were telling me that you could take the residual as a UFPLS but on revisiting it I think they are saying that option is only available for the whole AVC. I'm not sure why anyone would want to do that unless they like paying tax.
    The problem with socialism is that you eventually run out of other people's money.
  • jamesd
    Mine is the BT one James. The only way you are allowed to transfer to another pension like a SIPP is if you transfer the whole AVC. You are unfortunately limited with any residual after you have taken the max TFLS to the 2 options I mentioned. I had a letter from the trustees to confirm this.
    Originally posted by robin61
    Sorry, yours doesn't allow direct transfers, only indirect, per the AVC Options at Retirement booklet:

    "If you opt for option 3 or 6 in your retirement pack but still have residual AVCs over and above the amount that can be put towards your maximum tax free cash, then there is another option available in respect of these residual AVCs - “taxed cash”. Under the Freedom and Choice options this is what is referred to as an UFPLS – uncrystallised funds pension lump sum. An UFPLS is paid as a lump sum, of which 25% is payable tax free and the remainder is taxed as pension income at your marginal rate of tax. This would mean that on retirement your AVCs would be used to provide you with the maximum tax free cash available to you and the rest of your AVC fund would be paid to you taxed at your marginal rate – leaving no residual AVCs."

    Has to be requested before making the main choice but it is at least only the excess, not all of it.

    To do this as a "transfer" requires taking the UFPLS and depositing the taxable portion, at least, into the destination pension. That requires have investments sufficient pay in the tax year in which it's done to allow a new pension contribution of that amount, and sufficient annual allowance. Because the 25% tax free lump sum is provided it's actually more tax efficient than a straight transfer but it does limit how much can sensibly be moved this way to the annual pay available.

    Above annual pay just taking the money, paying the tax and doing something else more efficient than buying an annuity may make sense. Given the dire annuity rates likely to be available even paying 40% income tax and losing personal allowance if the income goes over £100,000 may beat that choice.
    Last edited by jamesd; 10-03-2017 at 4:46 PM.
    • greenglide
    • By greenglide 10th Mar 17, 4:52 PM
    • 2,898 Posts
    • 1,868 Thanks
    greenglide
    Funny how these schemes seem to vary.
    It is, isnt it!

    Mine was in no way generous in terms of level of pension (pensionable pay was actual pay less lower earnings limit) and some of the indexation is not brilliant but the actual running of the scheme (which doesnt actually cost them much) was fine and was generally flexible.

    A recent corporate reorganisation has had the excellent outcome of a huge sum of money being paid into the scheme, which has been closed to new members for some time but still has active members, to fully fund the scheme!
    • robin61
    • By robin61 11th Mar 17, 8:28 AM
    • 567 Posts
    • 447 Thanks
    robin61
    Sorry, yours doesn't allow direct transfers, only indirect, per the AVC Options at Retirement booklet:

    "If you opt for option 3 or 6 in your retirement pack but still have residual AVCs over and above the amount that can be put towards your maximum tax free cash, then there is another option available in respect of these residual AVCs - “taxed cash”. Under the Freedom and Choice options this is what is referred to as an UFPLS – uncrystallised funds pension lump sum. An UFPLS is paid as a lump sum, of which 25% is payable tax free and the remainder is taxed as pension income at your marginal rate of tax. This would mean that on retirement your AVCs would be used to provide you with the maximum tax free cash available to you and the rest of your AVC fund would be paid to you taxed at your marginal rate – leaving no residual AVCs."

    Has to be requested before making the main choice but it is at least only the excess, not all of it.

    To do this as a "transfer" requires taking the UFPLS and depositing the taxable portion, at least, into the destination pension. That requires have investments sufficient pay in the tax year in which it's done to allow a new pension contribution of that amount, and sufficient annual allowance. Because the 25% tax free lump sum is provided it's actually more tax efficient than a straight transfer but it does limit how much can sensibly be moved this way to the annual pay available.

    Above annual pay just taking the money, paying the tax and doing something else more efficient than buying an annuity may make sense. Given the dire annuity rates likely to be available even paying 40% income tax and losing personal allowance if the income goes over £100,000 may beat that choice.
    Originally posted by jamesd

    Thanks James and well spotted. I think they may have added this option to the booklet fairly recently. The wording I got from Accenture was a bit ambiguous but this is very clear.
    The problem with socialism is that you eventually run out of other people's money.
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