AVCs can get me under 40% ??

dunstonh

FSAVCs no longer exist. AVCs are largely obsolete nowadays as well and schemes no longer have a requirement to offer them and many are closing them to new entrants.

AVCs are treated as occupational pensions and this can create a few problems should you later decide to do income drawdown or phased retirement. Also, occ schemes have been given a long time to implement the changes and there is no requirement for them to offer a 25% lump sum on the AVC yet let alone delinking the AVC to the occ scheme. Like anything, some employers have been quick to embrace change whilst others put it off.

To be fair I had the same view as you until I came to retire and then found the company I worked for would take AVC'S into there scheme and give me far better rates than on the open market but would not touch FSAVC contributions.

One assumes that this is before the A day changes came into force. There were possible negatives then where people had been unable to retire early as they planned by using an AVC. So it is really a choice based on individual circumstances.

This is why I suggested buying back years especially if it is final salary scheme as that was it is inflation proofed as well and if you get promotion or big pay rises it goes up again.

Often the most cost effective option in the long run although it can appear expensive in the short term. Its a good option if you want to retire at the scheme retirement age but can actually be wasteful or a poor option if you are planning a phased or earlier retirement.

jem16

lowbrim wrote: »

Jem 16 You can still do this with AVC's. In fact it gives you more flexibility to do it this way than with FSAVC (Personal Pension). With AVC'S you can normally lump them into your company pension on retirement or go your separate ways as you would with a FSAVC.

I think this may depend on the company involved. I know the Teacher's AVC scheme changed just recently ( apparently you can now access the AVCs anytime from age 55 to 75) so others may have done so too.

This is why I suggested buying back years especially if it is final salary scheme as that was it is inflation proofed as well and if you get promotion or big pay rises it goes up again.

Usually the best way but can be also very expensive, especially the closer to retirement you are. Some have stopped the ability to buy back added years and replaced it with buying extra pension ( as in the Teacher's scheme).

pennine

I'm hoping to retire at 55, which is the earliest my scheme will allow. I have another 13 yrs to go until then and plan on maximising my avc contributions to keep me under the 40% bracket. I can also take 25% of my pension pot at 55 as cash which should amount to around 100K.
This year however I have left it too late to contribute in a nice spread out way as there are only 3 more pay packets to go. But the way I see it the 9K or thereabouts will always be there in the pot even though I can't get at it until I'm 55. At this time I can finish work and be under the 40% bracket, does this sound like a reasonable plan to you ?

pennine

I just noticed from Jems post that Interest on Savings are non taxable. not sure if that is correct ??

CLAPTON

pennine wrote: »

I just noticed from Jems post that Interest on Savings are non taxable. not sure if that is correct ??

unfortuantely when Jem cut and pasted the information the foramting went haywire

so Interst on Savings shouls have been a heading and not a line in its own right

so you are correct and except for ISAs/PEPS then interest is taxable.




So it should have read more like this :

Non Taxable


State benefits
Disability Living Allowance
Attendance Allowance
Lump sum Bereavement Payments
Pension Credit
Free TV licence for over 75s
Winter Fuel Payments
Housing Benefit
First 28 weeks of Incapacity Benefit
Interest on Savings
All ISAs and PEPs
Savings Certificates
Premium Bonds
Rents
First £4,250 from a lodger
(£2,125 if split between a couple)
Tax Credits
Working Tax Credit

jem16

pennine wrote: »

I just noticed from Jems post that Interest on Savings are non taxable. not sure if that is correct ??

As Clapton says that should have been a heading. I've now amended my post so it's clearer.

At this time I can finish work and be under the 40% bracket, does this sound like a reasonable plan to you ?

Sounds reasonable - you're getting 40% relief just now and will only pay 20% tax in retirement.

pennine

lowbrim wrote: »

Is the financial advisor independant ie not tied to a Bank of Building society etc they should be avoided at all costs in my view they. If you get a true independant advisor they should show you commissions etc they get from products they advice you on.

Hi Lowbrim, the only reason I was going to an IFA was to sort out this tax dilemma I have, not to buy any products from him. So ideally I would just wish to pay a fee for advice, however from the help I've had on this board I may not bother now. :j

dunstonh

If you get a true independant advisor they should show you commissions etc they get from products they advice you on.

All types of advisers should do this. Not just IFAs. However, some do sweep it under the carpet.

Fee options may be more expensive than commissions depending on size of policy sold. However, there is also a hybrid option where you agree the level of remuneration and this can be paid for out of the commission with any surplus being used as a rebate or to reduce charges. This option is typically only available from IFAs. Indeed, the FSA have proposed that it will be the only option available from 2009. Although those proposals have yet to be confirmed and are still under consultation.

from the help I've had on this board I may not bother now.

The help from the board would suggest that you shouldnt use an AVC. Buying of extra years, if it is available to you, may not be the best option depending on your scheme rules on what deductions exist if you take the benefits at age 55. This would leave stocks and shares ISAs and personal pensions (including stakeholder, personal and SIPP) as the viable options but they too could be eliminated depending on what you intend to achieve.

This year however I have left it too late to contribute in a nice spread out way as there are only 3 more pay packets to go.

Makes no difference apart for the AVC.

I have another 13 yrs to go until then and plan on maximising my avc contributions to keep me under the 40% bracket.

You are focusing on the tax. What about the investments? Whenever you invest, the first priority is where you invest and how (i.e. stockmarket, fixed interest, UK, Asia etc and how much into each). The second priority is tax wrapper (pension, ISA, bond etc). Next comes funds and charges (assuming you would use funds).

There is little point utilising a tax efficient option if you are going to blow most of the tax relief saved by using naff investment options or options which may end up costing you more in the long term if you decide to switch to a plan that does income drawdown or phased retirement.

You seem to know what you want but I dont think this thread has given you any pointer on which option is best. There is still insufficient info here to make that sort of decision.

jem16

pennine wrote: »

Hi Lowbrim, the only reason I was going to an IFA was to sort out this tax dilemma I have, not to buy any products from him. So ideally I would just wish to pay a fee for advice, however from the help I've had on this board I may not bother now. :j

I think I would still see an IFA. You may have better options than AVCs.

pennine

Thanks for the help, I do also maximise my stocks and shares ISA each year and have done for the last 5 years, I intend to next year also. I also have other savings that are taxed and an endowment policy maturing in April for approx 30K, hence my need to stay under the 40%. I may also be coming into some money in the not too distant future from inheritance, so all in all staying under 40% is quite important this year.