TPS contributions and AVC and impact on the HICBC 8 March at 6:06PM edited 8 March at 6:06PM in Pensions, annuities & retirement planning 3 replies 120 views

collins74

Hi everyone

My wife is in the TPS and earns £56,400.  She pays the usual 10.2% contribution into the main scheme and also pays £450 in a TPS AVC.

We thought the TPS contributions alone would be enough to bring her salary under £50k for assessing the High Income Child Benefit Charge however another teacher mentioned to my wife that they are not counted as they are pre tax but the AVC would be deducted meaning she is still above the £50k.

I’ve read various bits of information on this but I’m still unclear.   Can anyone offer a view?

Thanks 

MX5huggy

£450 to AVC per month or per year? 

Adjusted Net Income is what counts see https://adviser.royallondon.com/technical-central/pensions/state-benefits-pension-manuals/child-benefit-avoiding-the-tax-charge/

collins74

Sorry £450 per month @MX5huggy

Dazed_and_C0nfused

collins74 said:

Hi everyone

My wife is in the TPS and earns £56,400.  She pays the usual 10.2% contribution into the main scheme and also pays £450 in a TPS AVC.

We thought the TPS contributions alone would be enough to bring her salary under £50k for assessing the High Income Child Benefit Charge however another teacher mentioned to my wife that they are not counted as they are pre tax but the AVC would be deducted meaning she is still above the £50k.

I’ve read various bits of information on this but I’m still unclear.   Can anyone offer a view?

Thanks 

The other teacher is correct in one sense but totally wrong in another.

You cannot deduct "net pay" pension contributions when calculating any HICBC lability.

But that's because they have already been deducted in establishing her taxable pay.

So a "salary" of £56,400 with 10.2% net pay pension contributions actually equates to taxable pay of £50,647.

And £50,647 is the starting point for her adjusted net income amount, which is what is used to calculate HICBC.

You have to add in any other taxable income, interest, dividends etc, even if it is taxed at 0%.

And can deduct (for ANI) purposes any RAS pension contributions.

You will have to check if the AVC is paid under net pay or RAS to get the correct answer.  You need the gross contribution amount if it's RAS.