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
    • pantaiema
    • By pantaiema 6th Dec 17, 2:28 PM
    • 65Posts
    • 22Thanks
    pantaiema
    How to buy additional pension with TPS
    • #1
    • 6th Dec 17, 2:28 PM
    How to buy additional pension with TPS 6th Dec 17 at 2:28 PM
    I am currently 55 and I plan to retire at the age of 65 or even 67if it is still possible.

    My pension is with TPS and currently on 51k salary. I wanted to buy additional pension to bring down the tax I am currently paying to basic rate.

    How could I do that. Is buying AVC a good idea?
    On TPS is AVC the same with buying additional pension. I have seen from TPS website there is a tab to buy additional pension but but they only allow me to buy up to 6.6k is that correct?

    Thank u for help and sharing info
Page 1
    • OldBeanz
    • By OldBeanz 6th Dec 17, 2:53 PM
    • 703 Posts
    • 546 Thanks
    OldBeanz
    • #2
    • 6th Dec 17, 2:53 PM
    • #2
    • 6th Dec 17, 2:53 PM
    You are correct about the maximum extra pension that you can acquire in the TPS. To work out whether this is good value you would have to go to their calculator and input the relevant amounts. They tend to give value for money especially if using up your higher rate tax and you are unlikely to pay HRT in retirement.
    The AVC is an investment so the value can go down as well as up in line with your investments. You will not be penalised if you draw this early which tends to be its main benefit.
    • jem16
    • By jem16 6th Dec 17, 4:02 PM
    • 18,584 Posts
    • 11,407 Thanks
    jem16
    • #3
    • 6th Dec 17, 4:02 PM
    • #3
    • 6th Dec 17, 4:02 PM
    On TPS is AVC the same with buying additional pension.
    Originally posted by pantaiema
    It's not the same thing.

    With Additional Pension you are buying a guaranteed amount of pension in just the same way as your main pension. It will be index linked from when you purchase it. However it would also be actuarially reduced if you take it earlier than normal retirement age.

    AVCs are invested in Funds with a pension provider like the Prudential. Their value can go up or down according to the market. You can take them at any point from age 55.

    The other alternative is to use a PP/SIPP that will allow more flexibility in that you could use the pot to fund an earlier retirement until your main pension kicks in.

    Which is better for you depends on when you want to retire and your attitude to risk.
    • pantaiema
    • By pantaiema 6th Dec 17, 5:06 PM
    • 65 Posts
    • 22 Thanks
    pantaiema
    • #4
    • 6th Dec 17, 5:06 PM
    • #4
    • 6th Dec 17, 5:06 PM
    Thanks to both of you. So if AVC is not the same with buying additional pension. Which one you recommend in my case?

    Buying additional pension or buying AVC or both? I am considering myself as medium risk taker.

    At the moment I am not fancy of doing tax assessment which I have read, is needed if we subscribe to SIPP. So my plan is put it into AVC and or additional pension and then later move it to SIPP. Am I correct that I do not need to do self assessment if I am doing this?
    Last edited by pantaiema; 06-12-2017 at 5:13 PM.
    • OldBeanz
    • By OldBeanz 6th Dec 17, 5:20 PM
    • 703 Posts
    • 546 Thanks
    OldBeanz
    • #5
    • 6th Dec 17, 5:20 PM
    • #5
    • 6th Dec 17, 5:20 PM
    Obviously no one on here can recommend anything but the advantage of an AVC is it lets you drop your hours or retire early otherwise I would be thinking of added pension given increasing inflation, the uncertainties of Brexit and potentially a Trotskyite Labour government.
    • OldBeanz
    • By OldBeanz 6th Dec 17, 5:22 PM
    • 703 Posts
    • 546 Thanks
    OldBeanz
    • #6
    • 6th Dec 17, 5:22 PM
    • #6
    • 6th Dec 17, 5:22 PM
    If paying into an AVC or additional pension the tax will be dealt with by your pay system, so no requirement self assessment.
    • jem16
    • By jem16 7th Dec 17, 9:00 AM
    • 18,584 Posts
    • 11,407 Thanks
    jem16
    • #7
    • 7th Dec 17, 9:00 AM
    • #7
    • 7th Dec 17, 9:00 AM
    Thanks to both of you. So if AVC is not the same with buying additional pension. Which one you recommend in my case?

    Buying additional pension or buying AVC or both? I am considering myself as medium risk taker.
    Originally posted by pantaiema
    We canít really help you with that Iím afraid. I laid out the pros and cons of each.

    At the moment I am not fancy of doing tax assessment which I have read, is needed if we subscribe to SIPP. So my plan is put it into AVC and or additional pension and then later move it to SIPP. Am I correct that I do not need to do self assessment if I am doing this?
    You donít need to do a tax return just because youíre making contributions to a SIPP. You simply phone up HMRC and tell them how much you plan to contribute and they will adjust your tax code to give you the tax relief.
    • pantaiema
    • By pantaiema 7th Dec 17, 3:58 PM
    • 65 Posts
    • 22 Thanks
    pantaiema
    • #8
    • 7th Dec 17, 3:58 PM
    • #8
    • 7th Dec 17, 3:58 PM
    Thanks again.
    Is it possible to do the following:
    - purchase Additional pension (APC) £300 a month continuously until my NPA of 67.
    - in addition to it, I will also purchase AVC to bring down my Income to basic rate.
    - Thereafter I move AVC to SIPP. or I might go directly to SIPP?

    How easy it is to get 40% added to the SIPP once we call the HMRC?
    • jem16
    • By jem16 7th Dec 17, 4:31 PM
    • 18,584 Posts
    • 11,407 Thanks
    jem16
    • #9
    • 7th Dec 17, 4:31 PM
    • #9
    • 7th Dec 17, 4:31 PM
    Thanks again.
    Is it possible to do the following:
    - purchase Additional pension (APC) £300 a month continuously until my NPA of 67.
    - in addition to it, I will also purchase AVC to bring down my Income to basic rate.
    - Thereafter I move AVC to SIPP. or I might go directly to SIPP?
    Originally posted by pantaiema
    You can do all of that. Have you used the calculator to find out how much the Additional Pension will cost you?

    How easy it is to get 40% added to the SIPP once we call the HMRC?
    The whole 40% doesnít get added to the SIPP. Any gross payment you make will be uplifted by the basic rate tax relief. The additional 20% tax relief comes as a tax rebate.

    The easiest way to do it is to work out the gross amount you would want to have in the SIPP. You then pay 80% of that into the SIPP and the provider will apply the tax relief. You then tell HMRC what your gross payment is and they will adjust your tax code to give the other 20% relief.

    So for example if you wanted £1000 in the SIPP, then pay in £800. Tell HMRC you have made a gross payment of £1000 and you will then get the other £200 back through paying that much less tax. So your £1000 Payment has ended up costing £600.
    • pantaiema
    • By pantaiema 7th Dec 17, 7:47 PM
    • 65 Posts
    • 22 Thanks
    pantaiema
    Hi Jem
    Yes, I have used the flexibility calculator on TPS website. If I put £310 a month for 11years it will cost me £40,920.

    For this I will get an extra of £2,500 a year on the top of my occupational pension after my NPA which is 67. So it will not break even until 16.368 years. At that time I am already over 83. It seems not worthy at all. Did I miss something here?
    • jem16
    • By jem16 7th Dec 17, 8:08 PM
    • 18,584 Posts
    • 11,407 Thanks
    jem16
    Hi Jem
    Yes, I have used the flexibility calculator on TPS website. If I put £310 a month for 11years it will cost me £40,920.
    Originally posted by pantaiema
    That £310pm will only cost you £186pm though with tax relief.

    For this I will get an extra of £2,500 a year on the top of my occupational pension after my NPA which is 67. So it will not break even until 16.368 years. At that time I am already over 83. It seems not worthy at all. Did I miss something here?
    You haven't taken index-linking into account. It will start from when you start paying so will be more than £2500 when you get it and will continue to increase.
    • pantaiema
    • By pantaiema 8th Dec 17, 4:03 PM
    • 65 Posts
    • 22 Thanks
    pantaiema
    That £310pm will only cost you £186pm though with tax relief.

    You haven't taken index-linking into account. It will start from when you start paying so will be more than £2500 when you get it and will continue to increase.
    Originally posted by jem16
    Hi jem16
    Thank you for this info. This is probably what I need to consider when comparing the competing option of AVC, SIPP, or APC. Thanks again appreciate that
    • tigerspill
    • By tigerspill 8th Dec 17, 7:23 PM
    • 248 Posts
    • 76 Thanks
    tigerspill
    Are AVC contributions in TPS done as salary sacrifice and therefore benefit of both tax and NI free? Or just tax free?
    • jem16
    • By jem16 9th Dec 17, 9:23 AM
    • 18,584 Posts
    • 11,407 Thanks
    jem16
    Are AVC contributions in TPS done as salary sacrifice and therefore benefit of both tax and NI free? Or just tax free?
    Originally posted by tigerspill
    Itís not salary sacrifice so no NI saving.
    • tigerspill
    • By tigerspill 9th Dec 17, 3:46 PM
    • 248 Posts
    • 76 Thanks
    tigerspill
    It’s not salary sacrifice so no NI saving.
    Originally posted by jem16
    Thats what I thought. So I am wondering what are the advantages over a SIPP? To me an SIPP has much more flexibility.
    • jem16
    • By jem16 10th Dec 17, 1:25 PM
    • 18,584 Posts
    • 11,407 Thanks
    jem16
    Thats what I thought. So I am wondering what are the advantages over a SIPP? To me an SIPP has much more flexibility.
    Originally posted by tigerspill
    The only advantage is that tax relief is handled at source and you donít need to apply to HMRC for the extra 20%.
    • tigerspill
    • By tigerspill 10th Dec 17, 4:24 PM
    • 248 Posts
    • 76 Thanks
    tigerspill
    The only advantage is that tax relief is handled at source and you donít need to apply to HMRC for the extra 20%.
    Originally posted by jem16
    Thanks jem16 for this - confirming what I thought. To me the fund choice is much more important than claiming bach tax. And I haven't looked into the fees (I believe it is with Prudential? and I am guess their fees are relatively high).
    Though I thought some SIPP providers added the tax (at basic rate) on and therefore no need to reclaim it back. Not sure about this tho.
    • jem16
    • By jem16 10th Dec 17, 4:30 PM
    • 18,584 Posts
    • 11,407 Thanks
    jem16
    Thanks jem16 for this - confirming what I thought. To me the fund choice is much more important than claiming bach tax. And I haven't looked into the fees (I believe it is with Prudential? and I am guess their fees are relatively high).
    Originally posted by tigerspill
    I haven't looked at their fees recently.

    They have introduced some drawdown facilities for taking the AVCs but it's not quite the whole freedom.

    Though I thought some SIPP providers added the tax (at basic rate) on and therefore no need to reclaim it back. Not sure about this tho.
    Yes they do but it's the additional higher rate tax relief that was being talked about here. With the AVC you would pay in £100 but it would only cost you £60 as you pay less tax from your salary.

    The same applies to the SIPP but you would pay in £80, get it increased to £100 by the provider and then claim back the other £20 from HMRC so still only costs you £60. If you advise HMRC of your intended gross payment they will adjust your tax code and you get the relief right away anyway. Just requires one phone call ( each year perhaps if you change amounts ) rather than a tax return if you don't already do one.
    • tigerspill
    • By tigerspill 10th Dec 17, 6:36 PM
    • 248 Posts
    • 76 Thanks
    tigerspill
    I haven't looked at their fees recently.

    They have introduced some drawdown facilities for taking the AVCs but it's not quite the whole freedom.



    Yes they do but it's the additional higher rate tax relief that was being talked about here. With the AVC you would pay in £100 but it would only cost you £60 as you pay less tax from your salary.

    The same applies to the SIPP but you would pay in £80, get it increased to £100 by the provider and then claim back the other £20 from HMRC so still only costs you £60. If you advise HMRC of your intended gross payment they will adjust your tax code and you get the relief right away anyway. Just requires one phone call ( each year perhaps if you change amounts ) rather than a tax return if you don't already do one.
    Originally posted by jem16
    Ah - thanks - I didn't realise we were talking HRT.
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

3,121Posts Today

6,413Users online

Martin's Twitter