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Flexiplan AVC lump sum overpayment

15 Feb 2017, 00:38

I recently paid a lump sum into my Flexiplan account on the basis of a quote from the pension dept in Sheffield. I've found out that I paid roughly 6k in that I will be unable to get relief on. If my sell my shares now, will the tax be refunded or does its SIPP status prevent that. Many thanks, there's a fair chance I'll be leaving before October 18 anyway.

Flexiplan AVC lump sum overpayment

15 Feb 2017, 17:21

Pension rules allow you to put in as much into your pension/s as you want, but you only get tax relief on an amount equal to what you earn, up to a max of £40k per year. So there’s no real point in putting in any more.
However I believe it’s possible to carry over unused allowances from the previous 3 years, so all may not be lost.

Your free RM shares are held in a Share Incentive Plan(SIP) and only become tax free after you’ve held them for 5 years, unless you’re a good leaver. You can’t avoid paying tax when selling your shares early because you’ve paid too much into your pension.

Flexiplan AVC lump sum overpayment

16 Feb 2017, 11:57

Thanks Robert for your reply. This overpayment into my Flexiplan does rankle. I suppose after my prolonged PSE saga with Sheffield, I am at fault for taking what I was told at face value. Do I have any redress, if the Royal Mail Pensions helpline give me a lump sum figure on which I can claim tax relief which turns out to be wrong. Can I claim the unused part of the lump sum back?
Looking forward, the saving in tax and NIC's on your weekly wage AVC contribution is a real positive. I just wish the pension dept at Sheffield would review and speed up their dealing with people who want to pay the maximum into their weekly AVC and still qualify for PSE. It took me a few months to arrive at the optimum amount, paying about £300 more in NIC's than I needed to.

Flexiplan AVC lump sum overpayment

16 Feb 2017, 12:47

It seems you have 3 options:

a. Bite the bullet and just keep the extra £6k in your AVC.
b. Try and get the £6k back. I would suggest contacting the trustees rather than the normal channels.
c. Investigate whether you can utilise any unused allowances from previous years: https://www.pensionsadvisoryservice.org ... ry-forward I assume you’ll have to contact HMRC?

Paying into a pension is a great way of saving money when you factor in the benefits of tax relief and salary sacrifice(PSE). I don’t know why more people don’t do it.

I think the pensions centre only quotes you the maximum you can pay into your pension/AVC’s in total, because if they factored in PSE it may be seen as giving financial advice.

Flexiplan AVC lump sum overpayment

16 Feb 2017, 23:19

I am struggling to understand what has gone on here with the size of the lump sum AVC you paid into the Flexiplan relative to earnings for the current tax year. Foxy, did RM provide you with a certicate for the lump sum you paid and have you sent it to HMRC and have they denied your claim for tax relief via a change to your PAYE tax coding ? I agree the Pensions Helpline are less than helpful, very vague and loathe to provide any 'information' that might potentially be construed as having been advice !

The size of the lump sum you paid must have been colossal relative to earnings for you not to have qualified for tax relief, given that we are close to the end of the tax year.

Resorting to selling your shares early to compensate is really not a good move !

Flexiplan AVC lump sum overpayment

17 Feb 2017, 21:59

Robert, thanks again for the clarity of your answer. I'll look into whether I can carry forward any unused allowance.
Nataddick, I sent a cheque for the lump sum quoted to Sheffield, who issued me with a tax certificate for that amount, which I forwarded on to HMRC. Three weeks later I got a full tax rebate in my wages and they changed my PAYE code. There is now a 8k disparity between my Assessable Pay and new PAYE tax code with 6 weeks left in the yr. It seems that if you ring up asking for a lump sum quote they do not check if you have been making AVC payments through your wages. My lousy pension knowledge added to the confusion, an embarrassing faux pas to be honest.

Flexiplan AVC lump sum overpayment

27 Feb 2017, 21:50

It's not the putting into the AVC that's the problem, it's getting it out, my understanding is you have to get someone to buy it
The pensions people are good at getting you to join this, not so good at helping get it back.

Flexiplan AVC lump sum overpayment

27 Feb 2017, 22:20

foxyjarvis wrote:Robert, thanks again for the clarity of your answer. I'll look into whether I can carry forward any unused allowance.
Nataddick, I sent a cheque for the lump sum quoted to Sheffield, who issued me with a tax certificate for that amount, which I forwarded on to HMRC. Three weeks later I got a full tax rebate in my wages and they changed my PAYE code. There is now a 8k disparity between my Assessable Pay and new PAYE tax code with 6 weeks left in the yr. It seems that if you ring up asking for a lump sum quote they do not check if you have been making AVC payments through your wages. My lousy pension knowledge added to the confusion, an embarrassing faux pas to be honest.


Still not 100% sure whats gone off here - but, just for information, when I've made payments into my SIPP the SIPP provider has reclaimed the tax (tax which I haven't paid BTW) and added it to my SIPP account - IIRC around 5 weeks later.

Lump sum payments to the RM AVC's sound like a right ball ache by comparison.

Flexiplan AVC lump sum overpayment

28 Feb 2017, 05:47

Thebag wrote:It's not the putting into the AVC that's the problem, it's getting it out, my understanding is you have to get someone to buy it
The pensions people are good at getting you to join this, not so good at helping get it back.

The main aim of your AVC'S is to fund your tax free lump sum from the RMPP and so preserve as much pension income as possible. But there are 2 other choices:

a. Take a maximum 25% tax free lump sum and then buy an annuity(income for life) with the rest. You could do that from the company you save with(Zurich) or you might be able to get a better rate by shopping around. An IFA can often get the best deal. It will potentially be taxed.

b. Draw down the money over a period of time, with either 25% of the total or 25% of each withdrawal being tax free. The other 75% will be classed as income and possibly taxed.

Flexiplan AVC lump sum overpayment

28 Feb 2017, 05:49

jetblack wrote:Still not 100% sure whats gone off here - but, just for information, when I've made payments into my SIPP the SIPP provider has reclaimed the tax (tax which I haven't paid BTW) and added it to my SIPP account - IIRC around 5 weeks later.

Lump sum payments to the RM AVC's sound like a right ball ache by comparison.

When making AVC’s via payroll, you get the tax relief and the ‘NI relief’(PSE) at source. So if you make a gross payment of £10, your net pay is only reducing by £6.80.
If you want to make a lump sum payment, you have to pay the gross amount and then reclaim the tax. You don’t benefit from PSE on lump sums!

With private pensions such as stakeholders and SIPP’s, you only have to pay the net amount and then the tax is added on.

I’ve never really understood why there’s a difference.

Flexiplan AVC lump sum overpayment

30 Mar 2017, 10:32

An update on my lump sum overpayment which meant my tax code changed to £26,820. I sold my SIP shares and paid no tax which is a relief. Dealing charges £17.50, NIC's £100.78. I'm leaving the business before Oct 18 and have zilch confidence in the business going forward. It feels like the wheels are starting to come off, as recent talks are proving.

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