How to buy additional pension with TPS

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  • pantaiema
    pantaiema Posts: 183 Forumite
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    jem16 wrote: »
    That £310pm will only cost you £186pm though with tax relief.

    You haven't taken index-linking into account. It will start from when you start paying so will be more than £2500 when you get it and will continue to increase.

    Hi jem16
    Thank you for this info. This is probably what I need to consider when comparing the competing option of AVC, SIPP, or APC. Thanks again appreciate that
  • tigerspill
    tigerspill Posts: 774 Forumite
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    Are AVC contributions in TPS done as salary sacrifice and therefore benefit of both tax and NI free? Or just tax free?
  • jem16
    jem16 Posts: 19,398 Forumite
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    tigerspill wrote: »
    Are AVC contributions in TPS done as salary sacrifice and therefore benefit of both tax and NI free? Or just tax free?

    It’s not salary sacrifice so no NI saving.
  • tigerspill
    tigerspill Posts: 774 Forumite
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    jem16 wrote: »
    It’s not salary sacrifice so no NI saving.

    Thats what I thought. So I am wondering what are the advantages over a SIPP? To me an SIPP has much more flexibility.
  • jem16
    jem16 Posts: 19,398 Forumite
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    tigerspill wrote: »
    Thats what I thought. So I am wondering what are the advantages over a SIPP? To me an SIPP has much more flexibility.

    The only advantage is that tax relief is handled at source and you don’t need to apply to HMRC for the extra 20%.
  • tigerspill
    tigerspill Posts: 774 Forumite
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    jem16 wrote: »
    The only advantage is that tax relief is handled at source and you don’t need to apply to HMRC for the extra 20%.

    Thanks jem16 for this - confirming what I thought. To me the fund choice is much more important than claiming bach tax. And I haven't looked into the fees (I believe it is with Prudential? and I am guess their fees are relatively high).
    Though I thought some SIPP providers added the tax (at basic rate) on and therefore no need to reclaim it back. Not sure about this tho.
  • jem16
    jem16 Posts: 19,398 Forumite
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    tigerspill wrote: »
    Thanks jem16 for this - confirming what I thought. To me the fund choice is much more important than claiming bach tax. And I haven't looked into the fees (I believe it is with Prudential? and I am guess their fees are relatively high).

    I haven't looked at their fees recently.

    They have introduced some drawdown facilities for taking the AVCs but it's not quite the whole freedom.
    Though I thought some SIPP providers added the tax (at basic rate) on and therefore no need to reclaim it back. Not sure about this tho.

    Yes they do but it's the additional higher rate tax relief that was being talked about here. With the AVC you would pay in £100 but it would only cost you £60 as you pay less tax from your salary.

    The same applies to the SIPP but you would pay in £80, get it increased to £100 by the provider and then claim back the other £20 from HMRC so still only costs you £60. If you advise HMRC of your intended gross payment they will adjust your tax code and you get the relief right away anyway. Just requires one phone call ( each year perhaps if you change amounts ) rather than a tax return if you don't already do one.
  • tigerspill
    tigerspill Posts: 774 Forumite
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    jem16 wrote: »
    I haven't looked at their fees recently.

    They have introduced some drawdown facilities for taking the AVCs but it's not quite the whole freedom.



    Yes they do but it's the additional higher rate tax relief that was being talked about here. With the AVC you would pay in £100 but it would only cost you £60 as you pay less tax from your salary.

    The same applies to the SIPP but you would pay in £80, get it increased to £100 by the provider and then claim back the other £20 from HMRC so still only costs you £60. If you advise HMRC of your intended gross payment they will adjust your tax code and you get the relief right away anyway. Just requires one phone call ( each year perhaps if you change amounts ) rather than a tax return if you don't already do one.

    Ah - thanks - I didn't realise we were talking HRT.
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