NHS Pension and AVC

beansy

Hi

I have been paying into a cash AVC through my works nhs pension scheme for 20 yrs and have 21 yrs in superan. I believe I can now convert some of the AVC fund on retirement up to 25% of the total value of my pension benefits. Can anyone tell me how I work this out please?

Many thanks.

Eavestile

Formula
A = AVC lump sum
P = Pension
L = lump sum
A = (20P - 3L)/3
Example
Expected pension = 10,000
Expected lump sum = 30,000
A = ((20 x 10,000) – (3 x 30,000))/3
A = (200,000 – 90,000)/3
A = 36,666
Check
Pension fund is 266,666 (200,000 + 30,000 + 36,666)
25% maximum lump sum payout is a quarter of pension fund= 66,666
AVC maximum (after deducting pension scheme lump sum) is 36.666 (66,666 – 30,000).
This is how I think it works in the local government scheme where a pension and a lump sum accrued up to 2008. The formula takes into account the expected pension and lump sum to show the maximum AVC tax free payout (if this is limited to 25% of the value of the whole pension fund). In the local government scheme an in-house AVC can payout up to 100% as a tax free lump sum as long as the lump sum does not exceed 25% of the value of the whole pension fund. Check the rules for your own scheme and AVC.

Andy_L

beansy wrote: »

I believe I can now convert some of the AVC fund on retirement up to 25% of the total value of my pension benefits. Can anyone tell me how I work this out please?

This is not an option in the NHS scheme.
You have to take 25% of the AVC value, not the total value, as a lump sum. If you want any more lump sum it has to come from your final salary benefits. Depending on when you joined the NHS scheme you may have no choice & automatically get a lump sum.

beansy

Thank you both.

It will take me a little time to work out the first response and the second response is what as I thought.

I joined the scheme in 1992 so automatically qualify for a lump sum and pension.

My pension at the moment if I work till 60 will be worth approx £7500 plus my lump sum. I have also paid the max. 9% (as it was then) into the in-house AVC to make up for some of my first 5 yrs of service when I couldn't afford to pay Superann as it was optional then.

In addition to this we have no mortgage and therefore have been able to pay the maximum allowance into Tessa/ISA's each year almost from when they began.

Due to my dob I have to work till I am 63 before I get my state pension and my husband who is younger than I till he is 65.

Ideally we would like to both reduce to p/t working when I reach 60 and live off some of our savings.

We both have quite mentally stressful jobs and although I really enjoy my work I am beginning to feel burnt out having done this for the past 26 yrs in April. But before you say it, it has never been broing. The role has changed due to restructuring and other factors and I can honestly say that no 2 days are the same and there are new challenges every day, ie advancement in technology, IT systems policies & procedures, change management etc etc it's like a new job every few years.

However, I couldn't see myself giving up altogether and would like to continue working for the Charity I support in my released hours rather than my spare time as I do at the moment.

Do you think we should seek further advice from an IFA?

Thanks again for your advice and support.