early retirement AVC

robin61

My company sometimes offers an early leaver voluntary redundancy scheme. The fist £30k is tax free anything above that then tax is payable at your marginal rate.
However there is an option to pay some of the money into the AVC scheme which runs alongside the company pension scheme.
Question - could you claim tax relief from HMRC on the redundancy money you pay into the AVC. Also if this took you over the £40k annual limit could you use unused allowance from previous years to enable you to pay in more than 40k that year and would you get any tax relief on this also ?
Question - does the 40k limit only apply to what you have contributed into the pension scheme yourself ?

Thanks

kidmugsy

robin61 wrote: »

My company sometimes offers an early leaver voluntary redundancy scheme. The fist £30k is tax free anything above that then tax is payable at your marginal rate.

That's a common position.

robin61 wrote: »

However there is an option to pay some of the money into the AVC scheme which runs alongside the company pension scheme.
Question - could you claim tax relief from HMRC on the redundancy money you pay into the AVC.

You'd want to check with your employer, but I'd expect that they'd pay the cash gross into the AVC; in other words, there would be no tax deducted, so you wouldn't have the trouble of reclaiming it.

robin61 wrote: »

Also if this took you over the £40k annual limit could you use unused allowance from previous years to enable you to pay in more than 40k that year and would you get any tax relief on this also ?

I don't see why not in principle, but I don't know how the employer could have this information and act on it. You may find that you'll need to handle the extra by paying into a personal pension yourself, and claiming the corresponding tax relief yourself.

robin61 wrote: »

Question - does the 40k limit only apply to what you have contributed into the pension scheme yourself ?

No; it includes the increase in value of your pension in that tax year, calculated according to a standard formula laid down by the government.

P.S. I'm assuming that it's a Defined benefit scheme - i.e. usually Final Salary, or Career-averaged Salary.

robin61

Thanks for your help. Yes it is a DB final salary scheme. I see what you are saying about the gross payment that makes sense now.