DB Pension Advice

Taylor1964

Hi, I will be 60 in a couple of years and will be taking A final salary pension of around 12k per year. I will also get a lump sum (25% of fund value, achieved by commuting some pension plus AVC's). I also have around 20k of AVC's which my scheme allows me to take as part of my TFLS, so I wont need to commute so much pension to maximize TFLS. I intend to carry on working, so would like to know if there are any barriers to prevent me putting my 12k FS pension in a private scheme at 1k per month ? Does taking my AVC account (worth 20k) alongside my pension mean I will trigger the MPAA, meaning I can only contribute 4k per year ? I currently earn 48k so as things stand I will have to claim back some tax as salary & pension will push me into HR bracket.  Thanks

Albermarle

The MPAA is only triggered if you take taxable income from a DC pot . 
So I think should be no problems to contribute to a new pension at this level as long as you are still earning enough to be eligible for tax relief.

dasherman

The company I work for, Royal Mail, also allows AVC's to be used to fund the TFLS when taking pension benefits. Their communications say that once we've accessed our pensions and AVC's, the MPAA will apply and so contributions of £4k per year into AVC's or alternative DC pension arrangements would be allowed from then on.

It's because AVC's are classed as money purchase benefits despite the main scheme being DB.

Although it doesn't apply to any additional years AVC's you may have.

I would assume the same applies to all schemes?

xylophone

https://www.pru.co.uk/rz/localgov/sal-sac-avcs/

"Take your whole AVC pot as a 100% tax-free lump sum

You can take your whole AVC pot as a 100% tax-free lump sum. This is only possible if you take your main LGPS benefits at the same time. The total tax-free lump sum you take cannot be more than 25% of the total value of the LGPS benefits you take at that time. This includes any LGPS lump sum and your AVC pot and is subject to overall HM Revenue & Customs limits. Your LGPS scheme administrator will help you work out what you can take at the time."

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm063220

"For example, many registered pension schemes providing defined benefits to its members hold additional voluntary contributions (AVCs) paid by the member under a money purchase arrangement(s) thus separating them from the main scheme benefits which are held under a defined benefit arrangement(s). Instead of drawing two separate lump sum payments, each based on the pension entitlement from one of the arrangements, the scheme can give the member the option of drawing more (or all) of their total lump sum entitlement under the scheme from the money purchase arrangement(s) holding their AVC benefits. This means that the member can use any funds generated from their AVC fund to provide their entire lump sum benefit entitlement. The main scheme benefits retained in the defined benefits arrangement are then used to generate a higher scheme pension and no lump sum."


Looking at the above, as taking  just  the PCLS from a DC Scheme would not trigger MPAA and as the whole of the AVC would be a PCLS ( and the monthly pension a DB Scheme Pension), the MPAA might not be triggered?

OP should check with  his scheme administrator to be sure.