Avc help and guidance

[boyjammer]

Hi, i have an Avc and coming upto retirement age, when I cash in my AVC, can I still take the maximum lumpsum out of my pension at the same time? Thanks.

[RobertT]

You PM'd me. I replied!

[NWpostie]

I would be interested to see how that works in practice.

[bristo]

I took my AVC with my pension at age 60 both lump sums came to just over 60 thousand which is above the tax free threshold so I took just under 53 thosand lump sum with the rest of the AVC going towards my monthly payment it all depends how much your lump sum and AVC are combined hope this helps

[NWpostie]

It does, it's something I had considered but glad to have it confirmed, if my AVC lump sum goes above the tax threshold I can reduce it so that the rest can be converted to pension instead.

Of course nearer the time the rule can change, when I get loser to retirement, I will refer back to this forum when planning my retirement.

[boyjammer]

Thank you, so if for example both my AVC and my pension lump sum come to around 120k (50k Avc + 65k pension) how much will I get after Tax deducted?cheers.

[RobertT]

I took my AVC with my pension at age 60 both lump sums came to just over 60 thousand which is above the tax free threshold so I took just under 53 thosand lump sum with the rest of the AVC going towards my monthly payment it all depends how much your lump sum and AVC are combined hope this helps

In this situation i suspect you actually had 3 choices:

Take the excess AVC as taxable cash
Use the excess AVC cash to buy an annuity
Commute some of the main lump sum to more pension, and so stick to exactly 25% tax free cash

I suspect you actually did option 3. If you had directly used the excess AVC to provide more pension, you'd have bought an annuity, which would be a separate payment to your RM pension.

[RobertT]

Thank you, so if for example both my AVC and my pension lump sum come to around 120k (50k Avc + 65k pension) how much will I get after Tax deducted?cheers.

The £65k RM pension(using the 20x multiple) would I assume provide an income of around £3,250 per year?

With a pot value of £120k, the maximum tax free cash would be £30,000, with the remaining £25k either being paid as a taxable lump sum or used to buy an annuity.
There would be no option to commute to more RM pension because you'll already be getting the max.

You do have the option of taking a lower pension and a higher lump sum from the main scheme, which if you took the max lump sum of about £16k would leave a reduced pension of around £2,500.
But that would mean paying tax on all your £50k in AVC's.

[boyjammer]

Thank you again, the 65k pension is my lump sum from my 3 choices given to me by royal mail with then £13k a year pension income paid . So shouldn't the pension lump of £65 k be tax free due to it already being 25% of my pot, pot value is around £250 k , then the 55k Avc being the only part taxable?

[RobertT]

Thank you again, the 65k pension is my lump sum from my 3 choices given to me by royal mail with then £13k a year pension income paid . So shouldn't the pension lump of £65 k be tax free due to it already being 25% of my pot, pot value is around £250 k , then the 55k Avc being the only part taxable?

So now you've given us more info, you actually have a pot value(pension x20 + £65k lump sum) of £325k.

Add on the £55k in AVC's giving a total pot value of £380k.

Meaning a maximum tax free lump sum of £95k.

You will presumably also have some DBCBS to add on to that total pot value too?

It always helps to give as much info as possible.

[boyjammer]

Thanks again