Teachers AVC

I much prefer buying additional pension in the TPC, I have bought the max allowed in the old pre-2015 scheme. I can start to buy more in the post 2015 scheme when I join it in Aug 2020, and if I am still working I definitely will buy as much as I can.

I have enough other investments relying upon performance, which is one of the reasons that I particularly like the generous additional pension purchase.

marlot wrote: »

It could be a very wise move to continue to pay into the AVC, as I believe they are regarded as linked.

They're not linked in the Teachers' pension scheme.

She is now entitled to take a quarter of her pay on top of her personal allowance tax free...

Since she's now 55 or older she can pay into a personal pension, get the tax relief, take out 25% of the total as a tax free lump sum and leave the remaining 75% in a flexible drawdown pot untouched until she stops working. The effect is that if she pays in all of her taxable pay she gets to take out a quarter tax free and leave the rest for later.

If you have the savings to live on while doing this it can be lucrative.

There are two caps to annual pension contributions:

1. gross pay. No tax relief for paying in more than this. It is irrelevant whether the money being paid in is within the income tax personal allowance or not, it still qualifies for the relief.

2. the annual allowance of £40,000 a year, includes the value of employer contributions to any pension. For defined benefit the employer can tell you the value. Unused allowance from the last three years can be carried forward if you go over 40k.

The TPS AVCs probably don't allow putting money into drawdown like this.

Legally avoiding tax on a lot of pay is usually an excellent use of savings.

There are limits on recycling pension tax free lump sums into pension contributions for the same person. To reduce the potential for issues with this make most of the pension contributions monthly at an amount up to net pay before tax relief so it's easy to show HMRC that it's obvious that pay is funding the contributions. The easiest to follow recycling rule limits other than this are:

A. £7,500 of tax free lump sum per rolling twelve month period, not tax year.
B. Unlimited if the lump sum is from another person's pension. So you could have a tax free lump sum from one of your pensions paid into a bank account in your name and give it to her to use for pension contributions. The next tax year she can do the same for you, just be sure it doesn't look like obvious mutual gifts to evade the rules, different tax years is not law, just managing appearance.

It's really best to consider the whole house hold income, savings and work for this sort of planning so we can optimise for the whole household not just one person.

They are not linked TPS but they used to be marketed in TPS literature as an easy way to enhance your TPS via a separate Pru AVC

3. In SIPP do people need to do tax self assemenet exercise ? Why is it better to transfer from Prudential AVC to SIPP Is it because the AVC in prudential performance is doing bad ?

Tax self assessment is not necessary unless you are a higher rate tax payer; the 20% relief is credited to a SIPP account 6-11 weeks after the nett investment.

There are a number of advantages of a SIPP compared to a Pru AVC:-
1. Lower charges for a SIPP
2. Pru AVC only has a very limited choice of funds
3. SIPP buy and sell transactions can be performed at a time to suit the client (normally within 24 hours), Pru AVC transaction take often weeks to be processed and the value of funds can rise and fall dramatically during that period.
4. Most SIPP providers have good online tools allowing self management of the SIPP - the Pru AVCs didn't used to provide this (they may have changed but I doubt it!)