Lump Sums to AVC Application Deadline

[SMS1969]

On the tax relief question, if you put in £1000 of the lump some into a AVC, would you get £250 tax relief, ie 25%?

Yes.

[RobertT]

On the tax relief question, if you put in £1000 of the lump some into a AVC, would you get £250 tax relief, ie 25%?

Pension payments with RM are paid via wages, so you get tax relief at source.

Therefore a £1,000 gross payment would only actually cost you £800.

If you want £1,250 gross to go in, that would be a net of £1,000.

I assume you have to indicate the gross amount, as you do with your regular AVC payments.

On another note, this is the first time I can remember RM actively encouraging you to pay a one off lump sum into AVC's.
So maybe there is the possibility of benefiting from PSE, as the company will also gain by paying less employer NIC's.
I'm not privy to their FAQ's, perhaps it's mentioned?

[derricksmyth]

On the tax relief question, if you put in £1000 of the lump some into a AVC, would you get £250 tax relief, ie 25%?

Pension payments with RM are paid via wages, so you get tax relief at source.

Therefore a £1,000 gross payment would only actually cost you £800.

If you want £1,250 gross to go in, that would be a net of £1,000.

I assume you have to indicate the gross amount, as you do with your regular AVC payments.

On another note, this is the first time I can remember RM actively encouraging you to pay a one off lump sum into AVC's.
So maybe there is the possibility of benefiting from PSE, as the company will also gain by paying less employer NIC's.
I'm not privy to their FAQ's, perhaps it's mentioned?

Cheers Robert, I think I will ring pensions about the PSE question and hopefully get an affirmative on any possible benefits?

[Hyrrokkin]

Is this through the People app ?

[Jefferson Starfish]

Is this through the People app ?

See the first post!

[yellowbelly]

Iam going to top up my weekly avc paymebts to near the max pse and put the lump sum in a savings account then slowly withdraw the money to replace the extra weekly amount. That way i will get full pse, interest on the lump sum and also the payments being spread will hopefully even out buying the dips and highs and also the lump is still there for emergencies

Now that's an idea! Gonna have to get my maths head on to work out my max contribution to keep within PSE!

[freespeech]

On the tax relief question, if you put in £1000 of the lump some into a AVC, would you get £250 tax relief, ie 25%?

Yes.

We don't pay 25% tax. It would cost £800 (20% tax).

[reedy]

Iam going to top up my weekly avc paymebts to near the max pse and put the lump sum in a savings account then slowly withdraw the money to replace the extra weekly amount. That way i will get full pse, interest on the lump sum and also the payments being spread will hopefully even out buying the dips and highs and also the lump is still there for emergencies

Now that's an idea! Gonna have to get my maths head on to work out my max contribution to keep within PSE!

Probably around £115 id say

[SMS1969]

On the tax relief question, if you put in £1000 of the lump some into a AVC, would you get £250 tax relief, ie 25%?

Yes.

We don't pay 25% tax. It would cost £800 (20% tax).

What I’m saying is if you actually pay in £1000, you would receive £1250. I’m well aware that we don’t pay 25%.

[freespeech]

On the tax relief question, if you put in £1000 of the lump some into a AVC, would you get £250 tax relief, ie 25%?

Yes.

We don't pay 25% tax. It would cost £800 (20% tax).

What I’m saying is if you actually pay in £1000, you would receive £1250. I’m well aware that we don’t pay 25%.

You wouldn't as AVC's don't work like that. If you pay in £1k your AVC pot will increase by £1k....but that contribution would have cost you £800. If you pay in £1250 your pot would increase by £1250 but it would cost you £1k.

[SMS1969]

Yeah that’s what I meant, £1250 you end up paying in a grand.

[derricksmyth]

OK, I will put £1000 , on the application form , it will cost me £800, then I will get £600 of the lump sum to my wages to be taxed. No O /T for me the week before then?

[RobertT]

OK, I will put £1000 , on the application form , it will cost me £800, then I will get £600 of the lump sum to my wages to be taxed. No O /T for me the week before then?

Based on a total lump sum of £1,400(£900+£500):

You put £1,000 gross into your AVC, and as a result your income tax bill will be reduced by £200, meaning the net cost to you is £800.
The other £400 will be taxed normally.

If you also get the benefit of PSE, your NIC's will be reduced by £120. Meaning an overall net cost to you of £680.

[derricksmyth]

OK, I will put £1000 , on the application form , it will cost me £800, then I will get £600 of the lump sum to my wages to be taxed. No O /T for me the week before then?

Based on a total lump sum of £1,400(£900+£500):

You put £1,000 gross into your AVC, and as a result your income tax bill will be reduced by £200, meaning the net cost to you is £800.
The other £400 will be taxed normally.

If you also get the benefit of PSE, your NIC's will be reduced by £120. Meaning an overall net cost to you of £680.

Cheers yet again Robert!!

[reedy]

Has anybody heard if we get pse on these lump sums yet for certain?