Teachers AVC

pantaiema

Fermion wrote: »

Tax self assessment is not necessary unless you are a higher rate tax payer; the 20% relief is credited to a SIPP account 6-11 weeks after the nett investment.

There are a number of advantages of a SIPP compared to a Pru AVC:-
1. Lower charges for a SIPP
2. Pru AVC only has a very limited choice of funds
3. SIPP buy and sell transactions can be performed at a time to suit the client (normally within 24 hours), Pru AVC transaction take often weeks to be processed and the value of funds can rise and fall dramatically during that period.
4. Most SIPP providers have good online tools allowing self management of the SIPP - the Pru AVCs didn't used to provide this (they may have changed but I doubt it!)

Thanks it is very helpful. I am a high rate taxpayers.


I was told that AVC with TPS which I understand provided by Prudential; if you are 55yo+ and already with TPS then your AVC contribution will be taken from your gross salary (not net salary and the added back in your pension pot) so your tax will be based after the pension contribution is deducted and no need for tax assessment exercise if this is your only income.

What I am thinking, in the situation like this to avoid tax self-assessment exercise, it is better to contribute to AVC to bring down to basic tax rate and the rest to contribute to SIPP??
My question is that?
Is this plan the best way to do if the intention is that to avoid tax self-assessment exercise, but at the same time but at the same time take the advantage you mention about SIPP over Prudential AVC?
Any opinion, suggestion will be very much appreciated.

xylophone

https://www.pru.co.uk/rz/teachers/england-wales/literature/

https://www.pru.co.uk/pdf/AVCM19903.pdf

1 Take advantage of tax relief

It’s so easy to take advantage of tax relief – it’s all done for you by payroll.

For every £100 monthly contribution to a Teachers’ AVC, the actual cost will only be £80 if you pay tax at the basic rate. If you pay tax at the higher rate,the actual cost will only be £60. The contribution comes from your salary before it’s taxed, so the money you would normally pay as tax goes straight into your Teachers’ AVC instead.

chucknorris

pantaiema wrote: »

2. My I ask What is the maximum amount people could add in buying additional pension in the TPS after 2015 ?

£6,500, that is £6,500 index linked pension per annum, the cost will vary depending on individual circumstances, I bought £6,000 in the old scheme for about £75k.

Fermion

I was told that AVC with TPS which I understand provided by Prudential; if you are 55yo+ and already with TPS then your AVC contribution will be taken from your gross salary (not net salary and the added back in your pension pot) so your tax will be based after the pension contribution is deducted and no need for tax assessment exercise if this is your only income.

What I am thinking, in the situation like this to avoid tax self-assessment exercise, it is better to contribute to AVC to bring down to basic tax rate and the rest to contribute to SIPP??
My question is that?
Is this plan the best way to do if the intention is that to avoid tax self-assessment exercise, but at the same time but at the same time take the advantage you mention about SIPP over Prudential AVC?
Any opinion, suggestion will be very much appreciated.

If the particular educational establishment offers salary sacrifice then it's correct to say that you would make a small saving on NI contributions by going for a Pru AVC via this route and this would handle higher rate tax.
Having said that, I still think that you may end up paying more money through higher Pru AVC charges and potentially restricted AVC fund growth due to the limited number of funds available. (For example, Pru AVCs only offer a general equity fund, they don't provide equity funds for overseas markets etc).

Going for a SIPP I don't think you would necessarily have to go into self assessment (although this would be up to HMRC) but it would probably be best to register with HMRC for an individual Tax account to allow you to adjust your tax code online to take account of extra Higher Rate Tax rebates.

As I said, my wife was very happy to have switched from Pru AVCs to a HL SIPP; she achieved much better fund growth with the later. In addition, it also gave her the opportunity to open a S&S ISA alongside her SIPP to potentially minimise ongoing tax future post 25% lump sum.

pantaiema

Fermion wrote: »

If the particular educational establishment offers salary sacrifice then it's correct to say that you would make a small saving on NI contributions by going for a Pru AVC via this route and this would handle higher rate tax.
Having said that, I still think that you may end up paying more money through higher Pru AVC charges and potentially restricted AVC fund growth due to the limited number of funds available. (For example, Pru AVCs only offer a general equity fund, they don't provide equity funds for overseas markets etc).

Going for a SIPP I don't think you would necessarily have to go into self assessment (although this would be up to HMRC) but it would probably be best to register with HMRC for an individual Tax account to allow you to adjust your tax code online to take account of extra Higher Rate Tax rebates.

As I said, my wife was very happy to have switched from Pru AVCs to a HL SIPP; she achieved much better fund growth with the later. In addition, it also gave her the opportunity to open a S&S ISA alongside her SIPP to potentially minimise ongoing tax future post 25% lump sum.

Thanks for the advise.
Just come to mind. What about put it all in Prudential AVC to take advantage of deduction from gross salary and avoid self ssessment exercise.

Thereafter,iIf it is already in Prudentail AVC move it to SIPP using the SIPP platform of my choice. Is there any disadvantages of doing this ?? Is there any fee / penalty to move it from Prudential AVC to SIPP ?

Thanks in advance again.

Linton

tony4147 wrote: »

My wife is in the teachers pension scheme. For the last 4 years she has being paying £100/month AVC's which is with the Pru.
I don't know how this works but every year she gets a statement and this year the £1200 she has paid in has grown by £25, and this is no different than other years where the performance is poor.
I'm not sure if she selected funds when she started the AVC of whether she just went into the default funds but as far as I'm concerned the performace is very very poor.
As she is now 55 she wants to increase her contribution to £300 / month, but to me it looks like throwing good money after bad.

The biggest driver of performance generally isnt the scheme itself but rather what it is invested in. Which option is she using?

Fermion

Thereafter,iIf it is already in Prudentail AVC move it to SIPP using the SIPP platform of my choice. Is there any disadvantages of doing this ?? Is there any fee / penalty to move it from Prudential AVC to SIPP ?

There is no penalty fee but Pru do take a long time do the transfer which can be frustrating (and maybe costly) in volatile market conditions if Pru process the transaction during a market mini fall. I'm aware of your aversion to HMRC self assessment but you do need to think very carefully about the potential risk to your AVC fund pot both in terms of growth and transfer timing.

greenglide

and avoid self ssessment exercise.

Why the fixation of avoiding self assessment? The online self assessment is really simple and it is not as if it costs anything.

If you are a higher rate tax payer and you make any gift aid donations (sponsored runs, English Heritage, National Trust etc) you can claim extra tax relief here as well.

tony4147

The only reason I started the post is considering my wife paid £1200 gross into the Pru AVC I think £25 growth is extremely poor, and she has being paying in for about 4 years and growth hasn't been much better in previous years.
She is now in a position where she can pay more into an AVC but the Pru seems to be poor as it's not even keeping ahead of inflation.
She likes the idea of not having to do a self assessment hence the convenience of the Pru.

OldBeanz

What has she selected to invest in? My wife has an LGPS AVC with the Pru ( completely different treatment by employer but presumably similar treatment by Pru), can access it online and has a number of funds she can invest in.