Pension planning

zooks

Hi, 
Im leaving employment soon and have to declare my works pension preferences so please can someone confirm if I have this right?

I have a DB pension with a 3x PCLS and a company managed AVC scheme held by Aegon

I know I can commutation my yearly pension 28:1 to increase my PCLS and use my AVC rolled into this to get 25% tax free

However, I'm considering transfering my AVC out (it can't stay in house) into a DC pension and pay into it from my DB pension up to the new £10K limit to get 20% tax relief on it.

Can I do this?
Also I'm assuming i can take 25% of ghe the new DC pension tax free at a later date?

Albermarle

The £10K MPAA limit is not activated by taking a DB pension, only by taking taxable income from a DC pension.

In any case you can only get tax relief on employment income ( pension income does not count) although even if your employment earnings are zero, you can still add £2880 ( & £720 tax relief added) .
If you have employment earnings this tax year, they will still count even if you have stopped work, so maybe this tax year you can add more. 

MallyGirl

will you be earning £10k - pension income doesn't count as earnings. You cannot contribute more than you earn (apart from the £3600 pa that even non earners can do)

zooks

Ah I didn't realise I couldn't get the tax relief on my pension income.

So I can only get tax relief on the tax paid on my earnings up to my retirement effectively only applicable for a few months?

Is there any benefit in transferring my AVC out and not taking it as part of my PCLS?

Presumably to hope for future growth against interest earned as part of the PCLS?

Dazed_and_C0nfused

zooks said:

Ah I didn't realise I couldn't get the tax relief on my pension income.

So I can only get tax relief on the tax paid on my earnings up to my retirement effectively only applicable for a few months?

Is there any benefit in transferring my AVC out and not taking it as part of my PCLS?

Presumably to hope for future growth against interest earned as part of the PCLS?

The tax you paid has got nothing whatsoever to do with RAS pension tax relief.

Lots of non taxpayers contribute £2,880 net per year and receive £720 in tax relief from HMRC.

Your earnings will be the limiting factor in how much you can contribute but it doesn't matter about what tax you have or haven't paid.

Some people contribute £10k (net) each year and get £2.5k in tax relief despite paying no tax.

AlanP_2

zooks said:

Hi, 
Im leaving employment soon and have to declare my works pension preferences so please can someone confirm if I have this right?

I have a DB pension with a 3x PCLS and a company managed AVC scheme held by Aegon

I know I can commutation my yearly pension 28:1 to increase my PCLS and use my AVC rolled into this to get 25% tax free

However, I'm considering transfering my AVC out (it can't stay in house) into a DC pension and pay into it from my DB pension up to the new £10K limit to get 20% tax relief on it.

Can I do this?
Also I'm assuming i can take 25% of ghe the new DC pension tax free at a later date?

If, by the highlighted bit you mean you can take your AVC tax free as part of the PCLS why would you even consider transferring it out and then paying 15% tax to withdraw it?

More sensible approach would be to take it, say thank you to the taxman, and then reinvest it in an ISA and / or cash savings and / or spend it.