Advice on AVCs

musbury

Hello, I'm due to retire in August and have just realised that I may be missing a trick. I can make AVCs into my pension and take them as a tax free lump sum when I retire. So am I right in thinking that if I took out AVCs now and paid in £1000 a month Id get a tax free amount of £1250 back for evey £1000 I paid in, six months to go I could make 6 x £250 = £1500. Have I understood this right?
Thanks for your advice.

Linton

You are correct. I assume your AVCs are less than 25% of the value of your main pension.

musbury

Linton wrote: »

You are correct. I assume your AVCs are less than 25% of the value of your main pension.

Oh yes no problem, I've been paying into it for 33years.

ermine

you,sir, lack ambition, bigtime. Pay all your salary until April 6th into AVCs, live off savings or borrow as a personal loan. You can't beat an effective interest rate of 20%. Indeed, if you can pay a lump in then pay all your salary into AVCs before the end of March bar £8k, and you'll get it back in August with 20% added on top. Make sure you don't pay more than £50k in any one tax year, and that your AVC fund doesn't become greater than 25% of your pension at NRA * 20 (a guesstimate of the effective capital value of your FS pension).

This is one of the few legal opportunities for you to stop the thieving barstewards of the Government stealing money from you. It's rude not to take full advantage, even if you have to borrow in the short term (as long as your borrowing is << 20%)

jamesd

Find out the maximum you can do, from your scheme administrator. Then use non-ISA savings, credit card 0% deals that let you defer paying for things so you can pay in more, stoozing with credit cards, even many personal loans, possibly a mortgage advance. You're not going to get another chance to get 20% for a few months of work again so pay in the maximum you are permitted to pay in. That'll normally be the part of your salary that is higher than minimum wage. If you're lucky your scheme administrators will be helpful and tell you the limit.

carly

Hi, sorry to hijack this thread. my Oh and I are in a similar situation, with him due to retire in November.
I understand the basic premise outlined above, but wonder why you advise paying in any surplus cash into AVCs only until April..... can this not continue into the next tax year and up until retirement?

middlepuss

carly wrote: »

Hi, sorry to hijack this thread. my Oh and I are in a similar situation, with him due to retire in November.
I understand the basic premise outlined above, but wonder why you advise paying in any surplus cash into AVCs only until April..... can this not continue into the next tax year and up until retirement?

Yes, your OH can contribute, in total to all his pension plans, the amount he earns on which he pays income tax or £50,000 whichever is the lower, in each tax year.

Linton

middlepuss wrote: »

Yes, your OH can contribute, in total to all his pension plans, the amount he earns on which he pays income tax or £50,000 whichever is greater, in each tax year.

I think you mean lower , and I also think its based on earned income. Savings interest doesnt count.

cvd

or borrow as a personal loan

HMRC has rules about recycling - they might apply to doing something like that - but I am no expert.

middlepuss

Linton wrote: »

I think you mean lower , and I also think its based on earned income. Savings interest doesnt count.

Yes indeed, thank you, I did mean lower. I have edited the post. And yes, it's earned income - savings interest, share dividends and pensions in payment do not count as "earned".

Casciana

Hi,

My oh is in a company AVC scheme (savings acc not invested in shares) with Santander. He also has some personal savings with Santander, is the AVC scheme covered under the Financial compensation scheme (£85,000 personal limit) and if so is it included in the total allowance?