Redundancy Money Into AVC Query

Ninian_Park_Veteran

Hi, I recently took redundancy and put £20K of the £50K payment into an AVC and have the following query:

My understanding is that as I can take my pension from 55, I will receive 25% as a tax free lump sum (£5K) and the remaining £15K will be split over any term that I want it, so if i want it over 5 years, it will be £5K /5/52. Whilst i appreciate there will be some handling cost and the figure can fluctuate, have I got the principle right?

The other query is will I pay tax on the £15K regardless of my annual earnings, when i decide to take?

Hope that Makes Sense ;-)

Thanks

Ninian_Park_Veteran

I'm beginning to feel like I've asked a really silly non sensical question with 30 plus views but no replies. Can somebody tell me if that is the case.

Thanks

JoeEngland

After the 25% tax free lump sum the rest may be subject to tax depending on how much you earn in the year you take it - ie. the annual tax free allowance applies.

dunstonh

Ninian_Park_Veteran wrote: »

I'm beginning to feel like I've asked a really silly non sensical question with 30 plus views but no replies. Can somebody tell me if that is the case.

Thanks

It is a discussion board. Not live chat. People will reply when they have the opportunity.

My understanding is that as I can take my pension from 55, I will receive 25% as a tax free lump sum (£5K) and the remaining £15K will be split over any term that I want it, so if i want it over 5 years, it will be £5K /5/52. Whilst i appreciate there will be some handling cost and the figure can fluctuate, have I got the principle right?

You will need to check if your AVC allows that. Most do not. You would need to transfer the AVC to an individual plan to facilitate it.

If the AVC can be linked to the main scheme for payment of TFC, then it may not be beneifcial to draw it at 55 but leave it for when you take the main scheme.

And just because you can take it at 55 does not mean you should. Leaving it in until you need it usually the best option unless there are justifiable reasons otherwise.