full tax free refund of AVC?

artha

Am I right in thinking that I can take the whole of my AVC fund tax( company run)free providing it is not more than 25% of my total tax free allowance?

seems like a good idea as on commutation i would get £15 tax free per £1 of my normal pension but it would cost me £22 per £1 to buy pension with my AVC

dunstonh

Am I right in thinking that I can take the whole of my AVC fund tax( company run)free providing it is not more than 25% of my total tax free allowance?

If the scheme allow it to be used in conjunction with the main scheme then that is a possibility. If not, then no you cant.

artha

dunstonh wrote: »

If the scheme allow it to be used in conjunction with the main scheme then that is a possibility. If not, then no you cant.

If the scheme allows it then can I assume that taking AVC fund on the basis I described it is best option? My own scheme suggest that I can take all of my AVC as cash

I read about it in an AMICUS article that said that recent changes make AVC cashback a better option than commuting pension

artha

artha wrote: »

If the scheme allows it then can I assume that taking AVC fund on the basis I described it is best option? My own scheme suggest that I can take all of my AVC as cash

I read about it in an AMICUS article that said that recent changes make AVC cashback a better option than commuting pension

I'd appreciate a view on my post if anyone has the time please

EdInvestor

Yes it's a good idea, if allowed.

Jennifer_Jane

artha wrote: »

I'd appreciate a view on my post if anyone has the time please

If your pension is like mine, then the AC's are converted into a pension at a less advantageous rate than the pension conversion value. So, they automatically take the 25% from the AC's before they take it from the Pension.

Worth a call to them. I'm retiring in August 2009, and am putting £600 a month away into the AC's in order to build up the tax-free amount, and because of the tax advantage (comes out of pre-tax income).

Jen
x

artha

Jennifer_Jane wrote: »

If your pension is like mine, then the AC's are converted into a pension at a less advantageous rate than the pension conversion value. So, they automatically take the 25% from the AC's before they take it from the Pension.

Worth a call to them. I'm retiring in August 2009, and am putting £600 a month away into the AC's in order to build up the tax-free amount, and because of the tax advantage (comes out of pre-tax income).

Jen
x

Im also considering early retirement in Aug 2009 in conjunction with voluntary severance. Its only a short time away but now i know that I can take all the avc fund and not exceed the 25% total cash limit I should probably start increasing my contributions. There is a fly in the ointment however as my AVC fund is with Standard life and heavily invested in equities. If the stock market continues to lose value then so will my AVC

stockcash28

Hi,
How do you work out the 25% tax free allowance please?

I have a defered council pension payable also in 2009 plus a cash avc (council provided)with Prudential.I too would prefer taking all of my avc in cash rather than convert,is this possible?

Thank you
stockcash28

MrChips

It is possible to take all your AVCs as cash if the Trustees and Scheme Rules allow.

For tax purposes the maximum cash you can take is 25% of the value of the benefits, where AVCs are valued at market value and pension has a value of £20 per £1pa.

For example, if you have AVCs worth £50,000 and a pension of £10,000 pa and the scheme's commutation factor at retirement is 16 (say) you could take a tax free cash sum of £61764.70 which would mean taking all AVCs as cash and commuting £11,764.70 from your pension.

This would leave a pension of £9,264.71 (= 10000 - 11764.70 / 16)

Check... 9264.71 x 20 + 61764.70 = value of £247,058.90

and... 25% of £247058.90 = £61,647.70

The formula to work out max cash is:

((AVC / CF) + Pension) x 20 / (3 + 20 / CF)

Where:
AVC is value of AVCs
CF is commutation factor
Pension is amount of pension at retirement before commutation

Using example above:

((50000 / 16) + 10000) X 20 / (3 + 20 / 16) = 61,764.70

stockcash28

Mr Chips,many thanks for your help,much appreciated.

Aim afraid I'll have to contact my local authority pension dept and ask them if their rules allow as you say!

I received yesterday my 2008 pension statement and briefly it states that I will receive £3,750 per year,with a lump sum of £11,600 in 2009.

My cash avc's total £16,200,so from the information you kindly posted I think I would be able to take the cash avc's + the lump sum from the main scheme?

Thank you
stockcash28