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  • FIRST POST
    • dippenhall1
    • By dippenhall1 16th May 19, 12:18 PM
    • 16Posts
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    dippenhall1
    AVC into SIPP?
    • #1
    • 16th May 19, 12:18 PM
    AVC into SIPP? 16th May 19 at 12:18 PM
    Hi,

    I posted a couple of days ago and had some great ideas from this forum which Iíve discussed with my company pension people but have come up against an issue.

    Iím 50, have a DB pension. Iíd like to retire early at say 55. I could afford to start paying AVCs for the next 5 years with my company AVC scheme with the plan that is retire when I am 55, defer taking my DB pension until 60 & use my AVCs as a tax free lump sum to live off for 5 years.

    However my employer say that my AVCs would be linked to my company pension so I canít do this (take part now & defer the rest) I would have to transfer the AVC to a SIPP provider closer to retirement if I wanted to do this.

    I havenít made many further enquires, but wonder about the following

    1. Can you transfer an AVC to a SIPP provider and then a month later for example say you want to take all the money out as a TFLS? Is there a minimum period you have to stay with SIPP providers?

    2. If Iím lucky the AVC could be worth up to £50000 if Iím transferring it to a SIPP (in order to withdraw it) will it fall under the needing to get financial advice as itís over 30k?

    Anything else Iím overlooking?!

    The reason I like the idea of an AVC via my company as opposed to just setting up a SIPP is that because Iím a 40% tax payer I would have to reclaim the tax back rather than have it done automatically from my salary. Paying into a SIPP directly would probably mean Iíd end up contributing less as I would only get my overpaid tax back at the end of the year.

    Any thoughts would be great. Thanks everyone

    Dippenhall
Page 1
    • Marcon
    • By Marcon 16th May 19, 12:30 PM
    • 1,033 Posts
    • 792 Thanks
    Marcon
    • #2
    • 16th May 19, 12:30 PM
    • #2
    • 16th May 19, 12:30 PM
    You can't take your AVC as a tax free lump sum without drawing your DB pension at the same time if the AVC is still within the scheme. That's how DB schemes work.

    Only 25% of the cash from a SIPP is tax free, whatever its source. If you withdraw all the cash in your SIPP, you'll pay tax on 75% of it at your marginal rate - and sounds as if doing so would tip you into the higher rate tax bracket.
    • dippenhall1
    • By dippenhall1 16th May 19, 12:51 PM
    • 16 Posts
    • 1 Thanks
    dippenhall1
    • #3
    • 16th May 19, 12:51 PM
    • #3
    • 16th May 19, 12:51 PM
    Only 25% of the cash from a SIPP is tax free, whatever its source. If you withdraw all the cash in your SIPP, you'll pay tax on 75% of it at your marginal rate - and sounds as if doing so would tip you into the higher rate tax bracket.
    Originally posted by Marcon
    Thatís interesting, I didnít realise that. So itís 25% tax free from each pension you have, rather than an ability to take 25% of your all of your pensions from 1 particular pension?

    Thanks
    • dunstonh
    • By dunstonh 16th May 19, 1:13 PM
    • 98,597 Posts
    • 66,999 Thanks
    dunstonh
    • #4
    • 16th May 19, 1:13 PM
    • #4
    • 16th May 19, 1:13 PM
    Thatís interesting, I didnít realise that. So itís 25% tax free from each pension you have, rather than an ability to take 25% of your all of your pensions from 1 particular pension?

    Thanks
    Originally posted by dippenhall1
    Some AVCs have the facility to have the main scheme tax free cash taken from them. Most don't but its always worth a check.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Albermarle
    • By Albermarle 16th May 19, 1:49 PM
    • 883 Posts
    • 521 Thanks
    Albermarle
    • #5
    • 16th May 19, 1:49 PM
    • #5
    • 16th May 19, 1:49 PM
    So it’s 25% tax free from each pension you have, rather than an ability to take 25% of your all of your pensions from 1 particular pension?
    Normally that is the case .
    • jaybeetoo
    • By jaybeetoo 16th May 19, 3:44 PM
    • 859 Posts
    • 441 Thanks
    jaybeetoo
    • #6
    • 16th May 19, 3:44 PM
    • #6
    • 16th May 19, 3:44 PM
    When I retired, I had the option to take 25% from the total of my DB and AVC with all the cash coming from the AVC. Any money left over in the AVC would have to have been used to buy an annuity.

    The other option I had was take take my DB pension and transfer the AVC to a SIPP. I could take up to 25% of my DB pension as a tax free sum and up to 25% of my SIPP as a tax free sum - they are treated as separate pension pots.

    I could not touch my AVC until I took my DB pension.

    It sounds like your pension scheme has the same options.

    If you take all of the money out of your SIPP within a year, some SIPP providers will charge an extra admin fee (and there are the tax issues already mentioned by others).
    Last edited by jaybeetoo; 16-05-2019 at 3:50 PM.
    • xylophone
    • By xylophone 16th May 19, 4:03 PM
    • 29,932 Posts
    • 18,314 Thanks
    xylophone
    • #7
    • 16th May 19, 4:03 PM
    • #7
    • 16th May 19, 4:03 PM
    1. Can you transfer an AVC to a SIPP provider and then a month later for example say you want to take all the money out as a TFLS? Is there a minimum period you have to stay with SIPP providers?

    2. If I’m lucky the AVC could be worth up to £50000 if I’m transferring it to a SIPP (in order to withdraw it) will it fall under the needing to get financial advice as it’s over 30k?
    An AVC would not be a safeguarded benefit so you could transfer out to a personal pension without advice.

    You could then take a 25% tax free lump sum but the balance would be taxable as income in the tax year of receipt.

    You could spread out the withdrawals over a few tax years so as to remain within your personal allowance (s) and not pay tax.
    • cloud_dog
    • By cloud_dog 16th May 19, 5:43 PM
    • 4,284 Posts
    • 2,637 Thanks
    cloud_dog
    • #8
    • 16th May 19, 5:43 PM
    • #8
    • 16th May 19, 5:43 PM
    Dippenhall1, I've just posted my comments on your other thread.

    From what you say above, the scheme administrators have already confirmed you can transfer the AVC in to another pension / SIPP. I also asked my scheme administrators to confirm that I could undertake partial transfers, i.e. every couple of years transfer out £xxxxx, whilst continuing to make AVC contributions. The reason for this is that my AVCs are with Prudential and I have a limited number of funds I can choose from. Additionally the charges, whilst not extortionate, can be beaten elsewhere.

    I'm still a little unsure of my exact draw-down plan atm, as I am unsure if it will be beneficial to utilise the UFPLS method or simply take the 25% TFLS and then further taxed amount each year. TBC.
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • dippenhall1
    • By dippenhall1 17th May 19, 9:35 AM
    • 16 Posts
    • 1 Thanks
    dippenhall1
    • #9
    • 17th May 19, 9:35 AM
    • #9
    • 17th May 19, 9:35 AM
    An AVC would not be a safeguarded benefit so you could transfer out to a personal pension without advice.
    .
    Originally posted by xylophone
    Just to note that Iíve been in touch with Fidelity and Hargreaves Landsdowne and both have said I couldnít transfer an AVC which has any links with my DB pension without first getting Ďadviceí from in IFA!

    Even if Iíve set up the AVC for the sole purpose of transferring it to a SIPP. Something more to think about...
    • jaybeetoo
    • By jaybeetoo 17th May 19, 11:35 AM
    • 859 Posts
    • 441 Thanks
    jaybeetoo
    Just to note that I’ve been in touch with Fidelity and Hargreaves Landsdowne and both have said I couldn’t transfer an AVC which has any links with my DB pension without first getting ‘advice’ from in IFA!

    Even if I’ve set up the AVC for the sole purpose of transferring it to a SIPP. Something more to think about...
    Originally posted by dippenhall1
    Once you take your DB pension you can transfer the AVC to a SIPP without IFA advice providing there are no guaranteed benefits.
    Last edited by jaybeetoo; 20-05-2019 at 3:48 PM.
    • cloud_dog
    • By cloud_dog 20th May 19, 2:40 PM
    • 4,284 Posts
    • 2,637 Thanks
    cloud_dog
    Just to note that I’ve been in touch with Fidelity and Hargreaves Landsdowne and both have said I couldn’t transfer an AVC which has any links with my DB pension without first getting ‘advice’ from in IFA!
    Originally posted by dippenhall1
    Have you contacted your scheme administrators to confirm if there are any protected/guaranteed benefits associated with your AVC 'pot'?

    A number of pension providers are naturally cautious when it comes to touching anything DB scheme related but, if you have obtained confirmation from your scheme administrators and there are no guaranteed benefits associated with an AVC account then you may want to try AJ Bell/YouInvest SIPP.

    This is what I am planning on doing and have recently contacted AJ Bell to discuss my situation. They have confirmed that if the scheme administrators confirm no associated guarantees (which I have already obtained in writing) then they will be happy to accept the transfer.
    Last edited by cloud_dog; 20-05-2019 at 2:42 PM.
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • G4OJR
    • By G4OJR 21st May 19, 5:54 PM
    • 25 Posts
    • 3 Thanks
    G4OJR
    My plan was not to touch my Prudential LGPS AVC fund but transfer it to my SIPP for inheritance reasons. I know you have to do this after you've stopped paying in to it but I'm not aware of any other restrictions.
    • caveman8006
    • By caveman8006 7th Jun 19, 4:42 PM
    • 73 Posts
    • 13 Thanks
    caveman8006
    Ah...hadn't seen this thread when I started my similar one earlier today. But there does seem some confusion over the ordering of taking a DB pension and transferring an associated AVC pot in order to avoid the need for an IFA review. My scheme administrators (Willis Towers Watson) told me that there would not be any need for a review, but that the transfer away has to be completed before the Main Scheme pension can be brought into payment, which seems to be the opposite of the advice given above...Although there are no Guaranteed benefits granted to the AVC, the fact that it could be used to fund the PCLS for the Main DB Scheme pension is sufficient for HL to insist on a positive independent review - are you sure AJ Bell do not insist on this?
    • dippenhall1
    • By dippenhall1 8th Jun 19, 7:02 AM
    • 16 Posts
    • 1 Thanks
    dippenhall1
    Hi,
    I'm the OP of this thread. Since posting I've done some more research.. My DB scheme doesn't require any IFA advice for me to transfer my AVC to a SIPP. My plan had always been to leave my DB pension in place and use the AVC to fund 5 years before my drawing my DB pension. I contacted a number of SIPP providers and all of them said that they wouldn't accept the AVC transfer without an IFA review, even if my plan had been never to use the AVC as part of my DB pension.

    The only company who have said they would not need an IFA review was the company that I would have my AVC with - Fidelity. Even they at first said they'd want an IFA review, but on closer explanation have said that as the AVC is invested through them and I have written confirmation from my DB scheme that they don't need the IFA review they would be OK to accept the transfer without an IFA review - I just need to get that in writing from Fidelity now!

    It's a real minefield!
    Ah...hadn't seen this thread when I started my similar one earlier today. But there does seem some confusion over the ordering of taking a DB pension and transferring an associated AVC pot in order to avoid the need for an IFA review. My scheme administrators (Willis Towers Watson) told me that there would not be any need for a review, but that the transfer away has to be completed before the Main Scheme pension can be brought into payment, which seems to be the opposite of the advice given above...Although there are no Guaranteed benefits granted to the AVC, the fact that it could be used to fund the PCLS for the Main DB Scheme pension is sufficient for HL to insist on a positive independent review - are you sure AJ Bell do not insist on this?
    Originally posted by caveman8006
    • jaybeetoo
    • By jaybeetoo 8th Jun 19, 10:28 AM
    • 859 Posts
    • 441 Thanks
    jaybeetoo
    Try Alliance Trust Savings or interactive investor. Last year I transferred my AVC to an ATS SIPP without financial advice.
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