AVC limit calculation

thirtythreedragons

From direct.gov website. 'You can currently only pay 15 per cent of your salary into your company pension each year (including AVCs).'

I'm currently in the company money purchase scheme, making contrubutions of 3% with employer giving 5%, and also making additional AVC of 3% with employer giving 3%.

Therefore, is my current contribution 3+3=6% allowing me another 9% or 3+5+3+3=14% leaving me with only another 1% to contribute?

I feel its the first one, but the sentence is vague enough for me to also assume the 2nd calculation.

Thanks - Simon

ffacoffipawb

thirtythreedragons wrote:

From direct.gov website. 'You can currently only pay 15 per cent of your salary into your company pension each year (including AVCs).'

I'm currently in the company money purchase scheme, making contrubutions of 3% with employer giving 5%, and also making additional AVC of 3% with employer giving 3%.

Therefore, is my current contribution 3+3=6% allowing me another 9% or 3+5+3+3=14% leaving me with only another 1% to contribute?

I feel its the first one, but the sentence is vague enough for me to also assume the 2nd calculation.

Thanks - Simon

You can pay another 9%.

From April, you can pay another 94% (i.e. you can contribute 100% of your salary if you wish).

Obviously you would need to live off savings instead.

I intend to increase my 15% to 30% !!! April. On doing my sums, I can afford this and would rather build up my pension savings now at the ripe age of 52.

Debt_Free_Chick

thirtythreedragons wrote:

I'm currently in the company money purchase scheme, making contrubutions of 3% with employer giving 5%, and also making additional AVC of 3% with employer giving 3%.

Be careful about the type of "scheme" your employer is operating. In order to qualify for the current AVC of 15% of salary, you need to be in an occupational money purchase scheme. However, it is quite possible that your employer is contributing to a group personal pension scheme, which operates under different rules.

Can you check the booklet for the scheme and post back if you need any clarification?

thirtythreedragons

According to the heading of the annual statement letter its a 'Group Money Purchase Scheme'. I do believe it is an occupational scheme though.

dunstonh

Are you aware of the changes to AVCs and FSAVCs from April 2006?

Plus there are limitations on when you commence AVC benefits. They are not ideal if you are planning early retirement.

isasmurf

thirtythreedragons wrote:

According to the heading of the annual statement letter its a 'Group Money Purchase Scheme'. I do believe it is an occupational scheme though.

Sounds to me like a Group personal/stakeholder pension. Do you know if your pension contributions come out before or after tax? A way to check could be to look at your wage slip and see if your taxable pay the same as your gross pay?

Pal

isasmurf wrote:

Sounds to me like a Group personal/stakeholder pension.

No it doesn't - it sounds like an occupational group money purchase scheme.

It is, however, worth the OP checking with his employer before making any decisions.

thirtythreedragons

My contributions come out before tax. The company do also run a final scheme (closed to new members), and is a large ftse 100 company.

Just trying to max out my contributions in order to get tax credit.(Pension contributions are discounted in working out tax credit earnings).

I will look further into restrictions though, but my pension pot is still comparatively small enough for it not to matter too much. Its currently a fail safe cushion for old age, before I take on more financial risk in life.

thirtythreedragons

dunstonh wrote:

Are you aware of the changes to AVCs and FSAVCs from April 2006?

It would be interesting to alternate between one year of saving in normal savings account, so having to declare full earnings and not get any tax credit, then the second year putting most of earnngs into pensions, so that declared earnings for tax credit purposes are low (use last year's savings), and so getting full tax credit.