Alpha pension scheme, retiring early and AVCs

Sweetmelody_2

Hi - I’ve scoured the forum but cannot seem to find an answer to this particular questions.

I’m a 53 year old active member of Alpha with an NRA of 67 years old. If I start building AVCs, I understand that I can take them with my Alpha pension free of tax at 67 (I believe the tax free limit is annual pension * 20/3). However, if I decide to take the pension early with relevant actuarial reduction (say at 60), can I still take the AVCs tax free at the same time?

thanks

hugheskevi

You cannot take avcs as part of your alpha pension, they are separate.
You can only get the standard 25% tax free on avcs and can take them at any time after minimum pension age, regardless of when you take alpha.

Sweetmelody_2

Thanks @hugheskevi

I did say ‘with my alpha pension’ not ‘as part of’. I know that they are separate. But I understood from reading threads on here that you can take your AVCs as tax free cash, instead of commuting your alpha pension, as long as the value of the cash taken is less than the annual alpha pension * (20/3) maximum limit.

i have another DB pension where this is allowed within the scheme rules and I thought (from reading threads on here) that Alpha was the same. Happy to be told otherwise, though!

QrizB

Sweetmelody_2 said:

I did say ‘with my alpha pension’ not ‘as part of’. I know that they are separate. But I understood from reading threads on here that you can take your AVCs as tax free cash, instead of commuting your alpha pension, as long as the value of the cash taken is less than the annual alpha pension * (20/3) maximum limit.

LGPS works like that, but I don't think Alpha does?

Sweetmelody_2

Ok - thank you both   

hugheskevi

I did say ‘with my alpha pension’ not ‘as part of’. I know that they are separate. 

"Part of" is what is required to be able to take an avc as a pension commencement lump sum when commencing a Defined Benefit pension. You are able to take an AVC entirely cash free when it is part of the same pension as the Defined Benefit scheme, ie, they are not separate schemes, but both the DB and DC elements are part of the same scheme. 

When the scheme is designed this way, the combined value of the DB and DC pension counts toward the total pension value, from which you can take a pension commencement lump sum. As long as the AVC is less than the limit of the pension commencement lump sum, it can then be taken entirely tax-free.

Not all AVC schemes work in the same way - some are part of the same scheme as the Defined Benefit pension, and some are separate. Alpha and the Civil Service AVC scheme are separate.

Sweetmelody_2

Thanks so much @hugheskevi. Really important and helpful clarification of the distinction