PCLS and AVCs

shinytop

Hi,

I have a deferred DB pension that I recently found out (remembered really) has some AVCs. I understand that where there is a DB pension with AVCs then HMRC allows the PCLS to be taken from the AVC , which may (and in my case because the AVC is relatively small, I think would) mean I could take the whole AVC as a tax free lump sum. Is my understanding correct? If so, can my pension provider/employer stop me doing this, i.e. make me take the maximum PCLS from the DB component before I access the AVCs?

Silvertabby

kevfm wrote: »

Hi,

I have a deferred DB pension that I recently found out (remembered really) has some AVCs. I understand that where there is a DB pension with AVCs then HMRC allows the PCLS to be taken from the AVC , which may (and in my case because the AVC is relatively small, I think would) mean I could take the whole AVC as a tax free lump sum. Is my understanding correct? If so, can my pension provider/employer stop me doing this, i.e. make me take the maximum PCLS from the DB component before I access the AVCs?

It depends on the scheme rules.

In the LGPS, for example, you would be able to take all of your AVCs as cash if the total of your AVC and any automatic lump sum is no more than 25% of your total (pension x 20, automatic lump sum x 1 and AVC x 1) notional fund value. They can't make you commute any of your pension if you don't want to.

Other schemes, however, will only allow you to take 25% of your AVC fund as tax free cash.

drumtochty

My DB scheme allowed you to take all your AVC's tax free if when the AVC pots values when added to the value of the defined benifit scheme that is 20 x the initial annual pension from the DB scheme, were not more than 25% of the new larger pot and of couse if the larger pot was not over lifetime allowance.


Friends in a similar position with other company DB schemes were not so lucky but the pension manager of our scheme was due to retire three years after me and was getting everything into place for his retirement.

Dorian1958

What HMRC allow and what the pension scheme rules are can be 2 different things. Get a hold of the pension scheme booklet or to the scheme administrator. In my last year at work I chucked everything I could afford into my LGPS AVC then took it all out as a tax free lump sum on retirement. I didn't take anything from the pension itself so I could benefit from the unreduced pension for (hopefully) many years to come.