AVC vs Additional NHS Pension Contribution

pgbear

Just a follow up to let you know what I've decided after reading all the advice above. I discovered that I cannot pay any extra into my NHS pension via my monthly pay, as I am already paying the maximum at 9.3 percent. I believe it used to be around 6 percent as a default deduction until a year or so ago, when it was automatically increased to 9.3 percent.

I have decided that I will buy some additional NHS pension as this seems to be very cost effective.
The maximum annual pension I can buy is an additional 6,500 pounds. I plan to save money throughout the year and I aim to pay a lump sum to purchase additional pension once a year from now on. I hope to have managed this by the time I am 60. I am 49 now.

I don't plan to retire before I am 67, though I may go part time once I reach 60.

Thanks again for all the advice. It's been much appreciated.

Dazed_and_confused

I plan to save money throughout the year and I aim to pay a lump sum to purchase additional pension once a year from now on.

If you are paying by a lump sum like that then you may not receive any automatic tax relief. With your normal contributions you get tax relief through a "net pay" arrangement. Your salary may be say £30,000 but with 10% pension contribution you only pay tax on £27,000 (and the £27,000 is what's shown on your P60).

This doesn't normally happen with lump sum payments and they are paid outside the payroll process and you will need to contact HMRC to claim any tax relief due (this depends on how much your taxable income is and what tax you have paid during the year).

When contacting HMRC you need to make it clear it's a gross payment with no tax relief at source (this is relatively unusual and several posters have reported problems with HMRC not calculating the tax relief correctly).

SonOf

Dont forget that the AVC and Additional pension are not the only options. There are also stakeholder pensions, personal pensions, SIPPs, LISAs and ISAs. And for some VCTs may come into play.