How long does it take HMRC to add the 25%

sgx2000

so..
Given that I am about to setup an annuity

If I take £30k from premium bonds
Than add it to my pension before the annuity is setup. Gov adds 25%
Then
Get the annuity with 25% TFC
and put the whole TFC £29k back into premium bond account
Adds about £600 to the annual annuity

Is there anything wrong with doing this?
And, how long does HMRC take to add the 25%?

NoMore

Not enough information to say if its wrong or not, we don't know your relevant earned income (to see if you are breaking the tax relief limit) or your contributions from all sources to pensions this FY and possibly previous (to check you have AA to cover it).

As to how long Tax relief takes, depends on the provider some will add it immediately by pre funding or others will wait until they get the actual relief, which usually takes between 6 to 8 weeks.

dunstonh

With a provider that pre-funds it is instant.
With a provider that doesn't prefund it can be upto 8 weeks (typically less but it varies on the date in the month and then the provider submits to their return to HMRC)

If you are doing it with an annuity provider that does IVPPP then its immediate and joined up.

sgx2000

Sorry I should have taken my time and add the full details.

I am 63, Salary £40k,   £3k paid into Aviva pension annually,
Small DC workplace pension Approx. £78k

I am ready now to take an Annuity. (but continuing working until probably 66)

I was quoted - Single life, Flat , 10 Year guarantee (with medical conditions),
no TFLS,   £5600 by Aviva

Same conditions quoted £6200 by L&G

I was at the point of starting the process.  Then spoke to my company's pension advisor...
He suggested I should look into a more efficient way to use the pension fund and savings to pay less tax

So I looked at taking £30k from my premium bonds and adding this to my existing Aviva Pension
Once the gov adds 25%, a total of approx.  £115,500

Then I looked the figures for taking the £115,00 as an annuity with the same conditions as above, BUT with 25% TFLS

Tax free lump sum works out to £29K  -  back into Premium bonds...

BUT then Annuity is then £6868 -  Over £600 per annum higher...

So,  What am I getting wrong???

sgx2000

dunstonh said:

With a provider that pre-funds it is instant.
With a provider that doesn't refund it can be upto 8 weeks (typically less but it varies on the date in the month and then the provider submits to their return to HMRC)

If you are doing it with an annuity provider that does IVPPP then its immediate and joined up.

Thanks for the reply Dunstonh.

How will I find out if Aviva is IVPPP??

NoMore

Your not getting anything wrong, in the first case you have 78k to buy an annuity, in the second case you have about £86k to buy an annuity, so that will obviously lead to a higher income given the same conditions.

EDIT: This is in relation to my interpretation of your question about what I am getting wrong, in that you don't understand why you are getting a higher income from the annuity. You may be breaking the Tax relief limit, as it depends on your exact earnings (40k) and how your contributions to your pension are currently made, you are getting pretty close to it if we take your info at face value. I.e. 30k into pension +3k already contributed + Tax relief is above 40k.

eskbanker

sgx2000 said:

I was at the point of starting the process.  Then spoke to my company's pension advisor...

He suggested I should look into a more efficient way to use the pension fund and savings to pay less tax

I can see that cycling PB money into and out of the pension as increasing annuity income, but don't understand how it would involve paying less tax as such, so is your proposed action consistent with what he had in mind?

sgx2000 said:

Salary £40k,   £3k paid into Aviva pension annually,

[...]

So I looked at taking £30k from my premium bonds and adding this to my existing Aviva Pension
Once the gov adds 25%...

Adding the tax relief onto the £30K results in a pension contribution of £37.5K, so if you're already contributing £3K (plus tax relief?) then this would take you slightly over your salary if that's exactly £40K, so, just in case you haven't already come up with exact figures that recognise the limit on total annual gross pension contributions, you should! 

sgx2000

Many thanks for all the replies

So more exact figures

Pay £39750
£28k from premium bonds plus 25% = £35k
£35K + £78794 = £110,044

Tax free lump  £27,511  -- back to premium bonds
£6495 pension

So for using 28K from premium bonds for a few weeks to boost pension pot
The return is
£27.5k back to bonds
and a £306 per year increase in my pension....