Help sought with annual allowance charge

hugheskevi

Thanks, schema pays definitely doesn’t seem to be a good option for me With the interest so I am discounting that. Can I use my civil service AVC pot to pay the annual allowance charge immediately on my defined benefit pension?

Probably not, but your AVC provider may permit voluntary Scheme Pays even if you have not breached in that scheme. In which case you could reduce the AVC to pay the charge due from the DB scheme.

Not sure there is a big advantage in doing that though - wouldn't you be expecting an annual return of more than 4.5% over a long period? So if an 'interest rate' of 4.5-5% in the DB scheme is prohibitive, the opportunity cost of lost investment returns in the DC scheme should also be prohibitive?

The only thing I am thinking is I always planned to commute extra for a lump sum

It is shocking value unless you take the lump sum at a very old age, given you have options I'm surprised you are considering this.

Fphelp123

Thanks some great points for thought.

Another bit of confusion for me is that I have just got a very long email about the mccloud judgement and the possible remedy. My head is starting to spin calculating all of the possibilities.

Trying_to_be_good

As a civil servant who was ill-health retired, I wouldn't consider opting out of anything as you never know when you're going to need the wider benefits of the scheme - suck up the charge (scheme pays or otherwise), consider leaving whilst your classic benefits are linked to such a high salary! OK, that last bit is slightly sarcastic, and you may find you're better off sticking with alpha in the long term. Just don't leave the scheme(s) if you're sticking with the civil service.

Fphelp123

Thanks for all of the input, I decided to opt out for 12 months as the sums didnt stack up any other way for me. I am too young to benefit from the ill health retirement so that wasnt a factor.
I can have £35 k in a pension pot with over 20 years assumed reasonable growth and I don’t have to pay quite ridiculous annual allowance charge plus all of the other costs. I will opt back in in 12 months time having some good experience under my belt and should I get a permanent post at that level then I will take the annual allowance charge in the firs5 year of it in the knowledge it has bought me a big pension boost that I actually get to keep.

I Appreciate the opinions given.