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  • FIRST POST
    • dippenhall1
    • By dippenhall1 16th May 19, 12:18 PM
    • 15Posts
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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
    • 955 Posts
    • 736 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
    • 15 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
    • 98,311 Posts
    • 66,564 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
    • 745 Posts
    • 423 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
    • 818 Posts
    • 421 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
    • 29,494 Posts
    • 17,965 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
    • 4,241 Posts
    • 2,609 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
    • 15 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
    • 818 Posts
    • 421 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
    • 4,241 Posts
    • 2,609 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
    • 24 Posts
    • 2 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.
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