NHS retire and return, help understanding AVC and Annual Allowance

LightVesselAutomatic

Thanks for helpful answers to my previous query.
Because of the likely changes to the NHS scheme I am planning to retire, take my 1995 pension and then return to my post and continue contributions to the 2015 scheme.
I also have an AVC with Prudential and the plan is to put as much as I can into that over the next 2 years.
My 1995 pension is likely to be around 12K, salary 40 K
What I'm trying to understand is the rules around Annual Allowance and how much I can contribute to the AVC (I believe this
 is 80% of your salary - is this correct?)
Increasing AVC to 2K per month takes me to 24K per year, adding my pension contributions to the 2015 scheme takes it up to 28K, then adding employer contributions takes it up to around £34K, which is slightly over 80% of my pay (I'm doing calculations before tax)
Do my sums look right? I'm not sure I'm interpreting the rules correctly either. Would I need to keep my contributions below 32K.
I wish there was better training in pensions! I'm only just at the ripe age of 60 trying to understand how things work.
Thanks in advance

Moonwolf

Annual allowance for a DB scheme is not how much you have paid in, but the increase in value of the pensions.  So if your pension was £3K a year last year and rises to £4k a year this year you get 16x that, or £16,000 increase.  

It is a bit more complex than that, there are example calculations online such as https://www.nhsbsa.nhs.uk/member-hub/annual-allowance

Pat38493

Moonwolf said:

Annual allowance for a DB scheme is not now much you have paid in, but the increase in value of the pensions.  So if your pension was £3K a year last year and rises to £4k a year this year you get 16x that, or £16,000 increase.  

It is a bit more complex than that, there are example calculations online such as https://www.nhsbsa.nhs.uk/member-hub/annual-allowance

I often wondered about this because about 15 years ago, my company had to put quite a few million pounds into the pension fund after getting into trouble with the pensions regulator - I think it even made the news at the time.  However I never got clobbered by any tax bill.  I guess this is because the value of my personal rights and benefits didn't go up by more than 40K - it was just that the scheme was underfunded to pay out the obligations.

GrubbyGirl_2

As already stated it's not what you put in it's how much your pot grows.  On your total rewards statement you will see a "hypothetical annuity cost" which tells you the value of your pension pot.  That cannot grow more than £40kpa so be careful to keep an eye on that, though you can use unused amounts from previous 3 years

LightVesselAutomatic

Thanks, I'm not sure I have understood this correctly at all! I thought the AA was how much you could pay in.
So, I am now contributing to the 2015 scheme and have built up 1 year so far giving me a hypothetical annuity cost of 19K. Does this mean then that I can only pay in a further 21K? Or do I need to calculate a combination of how much each of the pensions grows? (NHS plus AVC). I am likely to retire fully in 3 years so I could use the past 3 years allowance?
Apologies, I wish I had started trying to understand this earlier!

Pat38493

No, there is a calculation behind the scenes which calculates the pension input amount that was added to your pension in the year.  Roughly speaking you could see this as the amount that you and your employer together would have had to pay in in order to deliver the benefits that you have currently accrued up to now.  In a public service scheme like NHS this is not a "real" amount so you won't find an actual transaction of this amount, but it's the theoretical amount of how much had to be paid to get your benefits to the right level in that year.

If that amount exceeds the AA, you might have to pay extra tax.  In practice, I think this can only happen if for example you get a massive pay rise in one year.

You need to find out what the relevant pension input amount for you for the year in question was - I was never in the NHS so I don't know how you get that - I would guess it's either available on the NHS portal or you have to call them to ask.