Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • tony4147
    • By tony4147 19th Jun 17, 7:42 AM
    • 254Posts
    • 35Thanks
    tony4147
    Teachers AVC
    • #1
    • 19th Jun 17, 7:42 AM
    Teachers AVC 19th Jun 17 at 7:42 AM
    My wife is in the teachers pension scheme. For the last 4 years she has being paying £100/month AVC's which is with the Pru.
    I don't know how this works but every year she gets a statement and this year the £1200 she has paid in has grown by £25, and this is no different than other years where the performance is poor.
    I'm not sure if she selected funds when she started the AVC of whether she just went into the default funds but as far as I'm concerned the performace is very very poor.
    As she is now 55 she wants to increase her contribution to £300 / month, but to me it looks like throwing good money after bad.
    Last edited by tony4147; 19-06-2017 at 7:53 AM.
Page 1
    • marlot
    • By marlot 19th Jun 17, 8:02 AM
    • 2,993 Posts
    • 2,141 Thanks
    marlot
    • #2
    • 19th Jun 17, 8:02 AM
    • #2
    • 19th Jun 17, 8:02 AM
    Removed, as I'm advised the AVC is not linked to the main pension - so my advice was wrong.
    Last edited by marlot; 19-06-2017 at 4:11 PM.
    • chucknorris
    • By chucknorris 19th Jun 17, 9:04 AM
    • 8,956 Posts
    • 13,474 Thanks
    chucknorris
    • #3
    • 19th Jun 17, 9:04 AM
    • #3
    • 19th Jun 17, 9:04 AM
    I much prefer buying additional pension in the TPC, I have bought the max allowed in the old pre-2015 scheme. I can start to buy more in the post 2015 scheme when I join it in Aug 2020, and if I am still working I definitely will buy as much as I can.

    I have enough other investments relying upon performance, which is one of the reasons that I particularly like the generous additional pension purchase.
    Chuck Norris can kill two stones with one bird
    The only time Chuck Norris was wrong was when he thought he had made a mistake
    Chuck Norris puts the "laughter" in "manslaughter".
    After running injuries I now also hike, cycle and swim, less impact on my joints.

    For the avoidance of doubt Chuck Norris is an actor and an ex martial artist (not me)
    • Fermion
    • By Fermion 19th Jun 17, 9:05 AM
    • 42 Posts
    • 14 Thanks
    Fermion
    • #4
    • 19th Jun 17, 9:05 AM
    • #4
    • 19th Jun 17, 9:05 AM
    My wife was in the same situation about 10 years ago. She decided to transfer the Pru AVCs into a SIPP with HL and to continue making regular payments into the SIPP. She is pleased that she moved into a SIPP. She drew her Teachers Pension 2 years ago but has not gone into Drawdown with her SIPP yet.

    Having said that, she had Unit Trust based AVCs with the Pru - not sure if your wife has somehow got a "With profits" AVC policy.
    • jem16
    • By jem16 19th Jun 17, 9:44 AM
    • 18,526 Posts
    • 11,310 Thanks
    jem16
    • #5
    • 19th Jun 17, 9:44 AM
    • #5
    • 19th Jun 17, 9:44 AM
    It could be a very wise move to continue to pay into the AVC, as I believe they are regarded as linked.
    Originally posted by marlot
    They're not linked in the Teachers' pension scheme.
    • tony4147
    • By tony4147 19th Jun 17, 10:07 AM
    • 254 Posts
    • 35 Thanks
    tony4147
    • #6
    • 19th Jun 17, 10:07 AM
    • #6
    • 19th Jun 17, 10:07 AM
    I much prefer buying additional pension in the TPC, I have bought the max allowed in the old pre-2015 scheme. I can start to buy more in the post 2015 scheme when I join it in Aug 2020, and if I am still working I definitely will buy as much as I can.

    I have enough other investments relying upon performance, which is one of the reasons that I particularly like the generous additional pension purchase.
    Originally posted by chucknorris

    It would cost my wife £85 / month for 5 years to get another £250 / year pension, not sure if that is worth it.
  • jamesd
    • #7
    • 19th Jun 17, 11:51 AM
    • #7
    • 19th Jun 17, 11:51 AM
    She is now entitled to take a quarter of her pay on top of her personal allowance tax free...

    Since she's now 55 or older she can pay into a personal pension, get the tax relief, take out 25% of the total as a tax free lump sum and leave the remaining 75% in a flexible drawdown pot untouched until she stops working. The effect is that if she pays in all of her taxable pay she gets to take out a quarter tax free and leave the rest for later.

    If you have the savings to live on while doing this it can be lucrative.

    There are two caps to annual pension contributions:

    1. gross pay. No tax relief for paying in more than this. It is irrelevant whether the money being paid in is within the income tax personal allowance or not, it still qualifies for the relief.

    2. the annual allowance of £40,000 a year, includes the value of employer contributions to any pension. For defined benefit the employer can tell you the value. Unused allowance from the last three years can be carried forward if you go over 40k.

    The TPS AVCs probably don't allow putting money into drawdown like this.

    Legally avoiding tax on a lot of pay is usually an excellent use of savings.

    There are limits on recycling pension tax free lump sums into pension contributions for the same person. To reduce the potential for issues with this make most of the pension contributions monthly at an amount up to net pay before tax relief so it's easy to show HMRC that it's obvious that pay is funding the contributions. The easiest to follow recycling rule limits other than this are:

    A. £7,500 of tax free lump sum per rolling twelve month period, not tax year.
    B. Unlimited if the lump sum is from another person's pension. So you could have a tax free lump sum from one of your pensions paid into a bank account in your name and give it to her to use for pension contributions. The next tax year she can do the same for you, just be sure it doesn't look like obvious mutual gifts to evade the rules, different tax years is not law, just managing appearance.

    It's really best to consider the whole house hold income, savings and work for this sort of planning so we can optimise for the whole household not just one person.
    Last edited by jamesd; 19-06-2017 at 11:56 AM.
    • marlot
    • By marlot 19th Jun 17, 4:10 PM
    • 2,993 Posts
    • 2,141 Thanks
    marlot
    • #8
    • 19th Jun 17, 4:10 PM
    • #8
    • 19th Jun 17, 4:10 PM
    They're not linked in the Teachers' pension scheme.
    Originally posted by jem16
    Happy to stand corrected. I've just checked my wife's and can find nothing about them being linked.
    • Fermion
    • By Fermion 19th Jun 17, 8:18 PM
    • 42 Posts
    • 14 Thanks
    Fermion
    • #9
    • 19th Jun 17, 8:18 PM
    • #9
    • 19th Jun 17, 8:18 PM
    They are not linked TPS but they used to be marketed in TPS literature as an easy way to enhance your TPS via a separate Pru AVC
    • tigerspill
    • By tigerspill 19th Jun 17, 9:02 PM
    • 239 Posts
    • 71 Thanks
    tigerspill
    I looked at AVCs for my wife in the TPS.
    The bit I couldn't work out is why because as far as I can see, this is not done by salter sacrifice hence you only save the tax and nit the NI. So would a SIPP not be better where we can choose a better set of funds?
    Or have I got something wrong?
    • pantaiema
    • By pantaiema 21st Jun 17, 10:56 PM
    • 48 Posts
    • 17 Thanks
    pantaiema
    As she is now 55 she wants to increase her contribution to £300 / month, but to me it looks like throwing good money after bad.
    Originally posted by tony4147
    1. Could you or someone else please shed the light why it is called throwing good money after bad ? Is it becuase of the AVC in Prudetial was doing bad at the moment ??

    I much prefer buying additional pension in the TPS, I have bought the max allowed in the old pre-2015 scheme. I can start to buy more in the post 2015 scheme when I join it in Aug 2020, and if I am still working I definitely will buy as much as I can.

    I have enough other investments relying upon performance, which is one of the reasons that I particularly like the generous additional pension purchase.
    Originally posted by chucknorris
    2. My I ask What is the maximum amount people could add in buying additional pension in the TPS after 2015 ?

    My wife was in the same situation about 10 years ago. She decided to transfer the Pru AVCs into a SIPP with HL and to continue making regular payments into the SIPP. She is pleased that she moved into a SIPP. She drew her Teachers Pension 2 years ago but has not gone into Drawdown with her SIPP yet.
    Originally posted by Fermion
    I am not quite sure but for people who are put additional pension in AVC they do not need to do tax self assement ?

    3. In SIPP do people need to do tax self assemenet exercise ? Why is it better to transfer from Prudential AVC to SIPP Is it because the AVC in prudential performance is doing bad ?
    • Fermion
    • By Fermion 22nd Jun 17, 8:53 AM
    • 42 Posts
    • 14 Thanks
    Fermion
    3. In SIPP do people need to do tax self assemenet exercise ? Why is it better to transfer from Prudential AVC to SIPP Is it because the AVC in prudential performance is doing bad ?
    Tax self assessment is not necessary unless you are a higher rate tax payer; the 20% relief is credited to a SIPP account 6-11 weeks after the nett investment.

    There are a number of advantages of a SIPP compared to a Pru AVC:-
    1. Lower charges for a SIPP
    2. Pru AVC only has a very limited choice of funds
    3. SIPP buy and sell transactions can be performed at a time to suit the client (normally within 24 hours), Pru AVC transaction take often weeks to be processed and the value of funds can rise and fall dramatically during that period.
    4. Most SIPP providers have good online tools allowing self management of the SIPP - the Pru AVCs didn't used to provide this (they may have changed but I doubt it!)
    • pantaiema
    • By pantaiema 22nd Jun 17, 9:32 AM
    • 48 Posts
    • 17 Thanks
    pantaiema
    Tax self assessment is not necessary unless you are a higher rate tax payer; the 20% relief is credited to a SIPP account 6-11 weeks after the nett investment.

    There are a number of advantages of a SIPP compared to a Pru AVC:-
    1. Lower charges for a SIPP
    2. Pru AVC only has a very limited choice of funds
    3. SIPP buy and sell transactions can be performed at a time to suit the client (normally within 24 hours), Pru AVC transaction take often weeks to be processed and the value of funds can rise and fall dramatically during that period.
    4. Most SIPP providers have good online tools allowing self management of the SIPP - the Pru AVCs didn't used to provide this (they may have changed but I doubt it!)
    Originally posted by Fermion
    Thanks it is very helpful. I am a high rate taxpayers.


    I was told that AVC with TPS which I understand provided by Prudential; if you are 55yo+ and already with TPS then your AVC contribution will be taken from your gross salary (not net salary and the added back in your pension pot) so your tax will be based after the pension contribution is deducted and no need for tax assessment exercise if this is your only income.

    What I am thinking, in the situation like this to avoid tax self-assessment exercise, it is better to contribute to AVC to bring down to basic tax rate and the rest to contribute to SIPP??
    My question is that?
    Is this plan the best way to do if the intention is that to avoid tax self-assessment exercise, but at the same time but at the same time take the advantage you mention about SIPP over Prudential AVC?
    Any opinion, suggestion will be very much appreciated.
    • xylophone
    • By xylophone 22nd Jun 17, 9:51 AM
    • 21,613 Posts
    • 12,427 Thanks
    xylophone
    https://www.pru.co.uk/rz/teachers/england-wales/literature/

    https://www.pru.co.uk/pdf/AVCM19903.pdf

    1 Take advantage of tax relief

    It’s so easy to take advantage of tax relief – it’s all done for you by payroll.

    For every £100 monthly contribution to a Teachers’ AVC, the actual cost will only be £80 if you pay tax at the basic rate. If you pay tax at the higher rate,the actual cost will only be £60. The contribution comes from your salary before it’s taxed, so the money you would normally pay as tax goes straight into your Teachers’ AVC instead.
    • chucknorris
    • By chucknorris 22nd Jun 17, 9:57 AM
    • 8,956 Posts
    • 13,474 Thanks
    chucknorris



    2. My I ask What is the maximum amount people could add in buying additional pension in the TPS after 2015 ?


    Originally posted by pantaiema
    £6,500, that is £6,500 index linked pension per annum, the cost will vary depending on individual circumstances, I bought £6,000 in the old scheme for about £75k.
    Chuck Norris can kill two stones with one bird
    The only time Chuck Norris was wrong was when he thought he had made a mistake
    Chuck Norris puts the "laughter" in "manslaughter".
    After running injuries I now also hike, cycle and swim, less impact on my joints.

    For the avoidance of doubt Chuck Norris is an actor and an ex martial artist (not me)
    • Fermion
    • By Fermion 22nd Jun 17, 10:46 AM
    • 42 Posts
    • 14 Thanks
    Fermion
    I was told that AVC with TPS which I understand provided by Prudential; if you are 55yo+ and already with TPS then your AVC contribution will be taken from your gross salary (not net salary and the added back in your pension pot) so your tax will be based after the pension contribution is deducted and no need for tax assessment exercise if this is your only income.

    What I am thinking, in the situation like this to avoid tax self-assessment exercise, it is better to contribute to AVC to bring down to basic tax rate and the rest to contribute to SIPP??
    My question is that?
    Is this plan the best way to do if the intention is that to avoid tax self-assessment exercise, but at the same time but at the same time take the advantage you mention about SIPP over Prudential AVC?
    Any opinion, suggestion will be very much appreciated.
    If the particular educational establishment offers salary sacrifice then it's correct to say that you would make a small saving on NI contributions by going for a Pru AVC via this route and this would handle higher rate tax.
    Having said that, I still think that you may end up paying more money through higher Pru AVC charges and potentially restricted AVC fund growth due to the limited number of funds available. (For example, Pru AVCs only offer a general equity fund, they don't provide equity funds for overseas markets etc).

    Going for a SIPP I don't think you would necessarily have to go into self assessment (although this would be up to HMRC) but it would probably be best to register with HMRC for an individual Tax account to allow you to adjust your tax code online to take account of extra Higher Rate Tax rebates.

    As I said, my wife was very happy to have switched from Pru AVCs to a HL SIPP; she achieved much better fund growth with the later. In addition, it also gave her the opportunity to open a S&S ISA alongside her SIPP to potentially minimise ongoing tax future post 25% lump sum.
    • pantaiema
    • By pantaiema 22nd Jun 17, 11:13 AM
    • 48 Posts
    • 17 Thanks
    pantaiema
    If the particular educational establishment offers salary sacrifice then it's correct to say that you would make a small saving on NI contributions by going for a Pru AVC via this route and this would handle higher rate tax.
    Having said that, I still think that you may end up paying more money through higher Pru AVC charges and potentially restricted AVC fund growth due to the limited number of funds available. (For example, Pru AVCs only offer a general equity fund, they don't provide equity funds for overseas markets etc).

    Going for a SIPP I don't think you would necessarily have to go into self assessment (although this would be up to HMRC) but it would probably be best to register with HMRC for an individual Tax account to allow you to adjust your tax code online to take account of extra Higher Rate Tax rebates.

    As I said, my wife was very happy to have switched from Pru AVCs to a HL SIPP; she achieved much better fund growth with the later. In addition, it also gave her the opportunity to open a S&S ISA alongside her SIPP to potentially minimise ongoing tax future post 25% lump sum.
    Originally posted by Fermion
    Thanks for the advise.
    Just come to mind. What about put it all in Prudential AVC to take advantage of deduction from gross salary and avoid self ssessment exercise.

    Thereafter,iIf it is already in Prudentail AVC move it to SIPP using the SIPP platform of my choice. Is there any disadvantages of doing this ?? Is there any fee / penalty to move it from Prudential AVC to SIPP ?

    Thanks in advance again.
    • Linton
    • By Linton 22nd Jun 17, 11:43 AM
    • 7,894 Posts
    • 7,700 Thanks
    Linton
    My wife is in the teachers pension scheme. For the last 4 years she has being paying £100/month AVC's which is with the Pru.
    I don't know how this works but every year she gets a statement and this year the £1200 she has paid in has grown by £25, and this is no different than other years where the performance is poor.
    I'm not sure if she selected funds when she started the AVC of whether she just went into the default funds but as far as I'm concerned the performace is very very poor.
    As she is now 55 she wants to increase her contribution to £300 / month, but to me it looks like throwing good money after bad.
    Originally posted by tony4147
    The biggest driver of performance generally isnt the scheme itself but rather what it is invested in. Which option is she using?
    • Fermion
    • By Fermion 22nd Jun 17, 11:49 AM
    • 42 Posts
    • 14 Thanks
    Fermion
    Thereafter,iIf it is already in Prudentail AVC move it to SIPP using the SIPP platform of my choice. Is there any disadvantages of doing this ?? Is there any fee / penalty to move it from Prudential AVC to SIPP ?
    There is no penalty fee but Pru do take a long time do the transfer which can be frustrating (and maybe costly) in volatile market conditions if Pru process the transaction during a market mini fall. I'm aware of your aversion to HMRC self assessment but you do need to think very carefully about the potential risk to your AVC fund pot both in terms of growth and transfer timing.
    • greenglide
    • By greenglide 22nd Jun 17, 11:50 AM
    • 2,674 Posts
    • 1,687 Thanks
    greenglide
    and avoid self ssessment exercise.
    Why the fixation of avoiding self assessment? The online self assessment is really simple and it is not as if it costs anything.

    If you are a higher rate tax payer and you make any gift aid donations (sponsored runs, English Heritage, National Trust etc) you can claim extra tax relief here as well.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

3,352Posts Today

7,277Users online

Martin's Twitter