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Does anyone know anything about AVC pension contributions?
My question is about tax I know there is some tax relief with an AVC, I already do pay about £250 per month but when I turn 55 I am looking to increase this amount, so the question is
If I currently take home £3000 per month but I want to save £2000 pm from my wages will I be able to take out an AVC for £2400 pm before tax and NI but only lose £2000 from my take home pay?
My question is about tax I know there is some tax relief with an AVC, I already do pay about £250 per month but when I turn 55 I am looking to increase this amount, so the question is
If I currently take home £3000 per month but I want to save £2000 pm from my wages will I be able to take out an AVC for £2400 pm before tax and NI but only lose £2000 from my take home pay?
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Here's a (free) start, GL
https://www.pensionwise.gov.uk |
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I was hoping someone has got some personal experience of saving this amount of money? I save about £250 pm now but its hard to tell how much exactly I am down omy monthly wages it gets lost in amoung everything else
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Only personal experience I have is that when I got to my retirement date I was pleasantly surprised with my AVC situation
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somebody at work should be able to tell you what you pay,
what your pension may pay out, if additional payments are allowed, and if so how much. pensionwise is a good tip. they will give you advice. if your avc wont take as much as you want to put in you may have to set up another pot, .... |
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I think an AVC is a Defines Benefit Scheme so therefore you can almost put in what you like.
Just to clarify is it a Company AVC? If so do they match your contributions? Is it an FS ( Free Standing ) AVC ( PP ) ( Personal Pension? ) Company AVC's get tax relief at your highest rate effectively at source ( straight away ). I imagine if you take a Salary Sacrifice to achieve this you will be paying less tax and National Insurance but you better speak to your Company Account or HR to confirm. A lot of smart people who do not need the income do this. If you have say an Insurance Company FS AVC then you will be effectively getting basic rate tax relief at source and will have to claim higher rate tax paid. When did you take out the AVC? Before 2006 or after? |
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After 2006 the company is the Royal mail and there as been quite a few changes over the years so asking people who I work with can be difficult my normal pension is now split into three that has really hurt the overall value of my pension so I decided to try and recover the losses by taking out an AVC
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You probably need to get advice macarony
The Royal Mail Pension Scheme I believe is one of the better ones How many years have you worked? That is really important https://www.royalmailpensionplan.co.uk/ The first thing they ask is if you joined before 1987 or after. usually it is best to go with the Company AVC as they usually make contributions on your behalf or match what you are putting in. Why is your Pension split into 3? How old are you? You must have some sort of Pensions Adviser attached to your firm. That is a good starting point. I remember back in the 80's loads of blokes left the BT Pension Scheme. This was a bad mistake. Be careful of people advising you to take the lot out and putting it into one new place to make the paper work easier. You probably have some sort of indexed linked pension with the Royal Mail, that is invaluable. |
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your union may have a pension advisor too.
worth a phone call |
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Is it a Final salary scheme
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Whatever you pay into your pension is free of tax. If you pay 40% tax on some of your earnings, you 40% tax relief on that part of your salary which is taxed at 40%. You may save up to 40K each year into your pension(s). Don't forget that your pension is taxable when you draw it, though you may take 25% of the pot tax free when you start drawing it, or take 25% tax free each time you withdraw. Legislation can change, so being able to take 25% of the pot tax free may not be possible in the future, if they change the rules. For that reason, I'll be taking 25% of the pot at my earliest opportunity.
Also, you have your personal allowance each year (12.5K), before you pay any tax. If you have a company scheme, your employer might match some contributions, or might refund company NI on your salary sacrifice. (salary sacrifice is the amount paid into a company pension scheme & no tax is paid on it at the point of investing in your pension) The employer’s National Insurance rate is 13.8%. If your company refunds company NI with salary sacrifice, this means when you save £100, £113.80 goes into your pension. If you took that as earnings, you'd get £80, if you were paying 20% tax. If your company does not refund company NI with salary sacrifice, then they keep the £13.80 per £100 for themselves! They are not obliged to refund it. My company does refund company NI. If you have your own SIPP, you pay into the SIPP & the government automatically tops up your tax refund into your SIPP. |
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I 23 years in what started out as the old GPO pension I was one of the last to get in when I started in 86 but unfortunately they merged the scheme with the new one they started a few months later, this pension ran until 2008 when it was capped and you could no longer contribute to it anymore and as you know with any investment they only start making money after about 10 years. So we had to start another pension in 2008 that again was capped about 2 years and we are now on my third. If it wasn't bad enough that the only contribution going into my original pension was my own because the government said that there was enough funds in the pot so the Royal mail don't need to pay anything in this was one of the reasons given for the Royal mail pension scheme been merged. The annoying thing is if I had just been allowed to continue with my original pension I would be in much better financial position come retirement
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