AVCs can get me under 40% ??

jem16

pennine wrote: »

an endowment policy maturing in April for approx 30K, hence my need to stay under the 40%.

Could that take you back into higher rate tax when added to your income?

dunstonh

endowment maturities are not a chargeable event and you will have no tax to pay on that.

lowbrim

Pennine, looks like you are well sorted on your plans. If you are in a final salary scheme I would go for AVC's if added years are not available. Whilst they seem expensive that is because the benefits are far better and if you retire early you can actually benefit as companies tend to round up years. Your plans are as mine were 15 years ago and following a strategy similar to yours helped me achieve the objective of retiring at 52 (3 years ago) although I missed my target age of 50 by 2 years!

As for tax rates whilst you may not think you will be a 40% tax payer now when you retire that may not actually be the case but given that you are a few years away from retiring it is not something to worry about all sorts of things could change outside of your control and given that you seem to have quite a few investments that can be crystalized in an emergency and can afford to put some in your pension pot I would say go for it!! and the best of luck in achieving your target of retiring at 55 it is well recommended.

Personally I would not bother with a financial advisor given your actions to date you probably know more than they do.

dunstonh

Personally I would not bother with a financial advisor given your actions to date you probably know more than they do.

You havent been reading the thread then. There are a number of corrections that have been made.

We have insufficient data available on this thread to say one way or the other but AVCs are largely obsolete nowadays. Some AVCs are just downright awful by todays standards.

Tell me lowbrim, what fund options and charges does Pennine have available on the AVC? What are the charges for taking pension benefits at 55? Is income drawdown going to be used or annuity purchase? You appear to know the answer to those hence why you have made your recommendation.

Im dont mean to be that critical but you cannot make such a statement based on the contents of the posts on this thread.

SilverScooby

pennine wrote: »

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.

I don't know anything about AVCs, but of you were to put the money into a SIPP you wouldn't be limited to the last 3 pay packets. If you had the funds you could put anything up to your entire net income for the year any time before the end of the tax year.

Def see an IFA to discuss options

jem16

lowbrim wrote: »

If I am reading the figures correctly you will be paying 40% tax on all income from now until the end of the year so if you invest all your earnings in a AVC you will get full 40% tax relief

Not the way I read it.

Pennine earlier said;

My last pay slip showed a year to date earnings of £37710 and a Taxable GR of £36232.

His tax code is 518L so higher rate tax for him starts at £39,781. He currently has £36,232 of taxable income so still another £3,549 till he hits higher rate tax.

dunstonh

His tax code is 518L so higher rate tax for him starts at £39,781. He currently has £36,232 of taxable income so still another £3,549 till he hits higher rate tax.

And coupled with not realising that the endowment maturity is not going to have a tax liability means that ISAs and then unit trusts are probably a much better option for additional retirement planning.

pennine

jem16 wrote: »

Could that take you back into higher rate tax when added to your income?

Hi Jem it may do but I can vary the amount of AVCs to compensate.

pennine

dunstonh wrote: »

And coupled with not realising that the endowment maturity is not going to have a tax liability means that ISAs and then unit trusts are probably a much better option for additional retirement planning.

I am aware that a matured endowment is tax free as I am sure Jem is, it becomes taxable when it is sitting in a high rate savings account after maturity i.e. becoming taxable income. Hopefully that would not be for too long.

jem16

pennine wrote: »

I am aware that a matured endowment is tax free as I am sure Jem is,

To be honest I wasn't.

Hi Jem it may do but I can vary the amount of AVCs to compensate.

I take it you've decided to go down the AVC route then?