Tax free lump sum to repay mortgage capital

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  • saucer
    saucer Posts: 423 Forumite
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    jamesd wrote: »
    VCTs are more about smaller company investing to cut the ongoing tax burden. Once you've bought for five years you can just recycle the same money.

    No guarantees refers to investing in general. Includes SIPP and value of AVCs as well as VCTs.


    Thanks James. I thought that but I had a look at VCTs, noting that you seem keen on them, but they look a lot more risky than some other investments, especially when I need to be confident that I will get back most of what I invest. I know this is never guaranteed, but given I will at some stage have to pay off mortgage capital, I am want to be conservative, while getting the benefit of the 100% tax free element of the LGPS AVC.


    I very much appreciate yours and other peoples views on this plan.
  • MK62
    MK62 Posts: 1,450 Forumite
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    I think you only get that benefit within the overall limit of 25% of your total pension value though.....it's not in addition to that I don't think!
  • saucer
    saucer Posts: 423 Forumite
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    MK62 wrote: »
    I think you only get that benefit within the overall limit of 25% of your total pension value though.....it's not in addition to that I don't think!


    No I understand that, but as it is we would be looking at a regular pension with a small non-optional lump sum, versus building up a much larger AVC which would still be less than 25% of the total value, and therefore could be taken tax free, under current rules at least. That seems like a good idea/plan to me but I wanted to see what people thought.
  • MK62
    MK62 Posts: 1,450 Forumite
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    OK, well any tax free lump sum is always welcome, especially you get given tax relief while you save it. If your TFLS from your main account is limited, then it would seem your AVC plan could be a good one, given it could all be tax-free when withdrawn vs the 25% from a SIPP.


    You need to do some modelling and see what return you need to make on your tax relief boosted AVCs, in order to arrive at your desired outcome....and see if you feel it's realistic....and then compare it to paying down the mortgage debt with the same money.
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