Lump Sums to AVC Application Deadline

[RobertT]

As Robert has pointed out - we will have to pay 12% NIC on the £1400. This is £168

If you paid in £1750 to your pension - then you would be charged the £1400 of the bonus. You would avoid paying 20% tax on £1,400 and £168 NIC
End result you have £1,400 in your pension as opposed to £952 into your bank account.

That's more or less correct, although I'm not sure where you get the £1,750 from.

If you made a £1,400 gross AVC, your income tax would reduce by £280 and if you benefit from PSE too(unknown at the time of writing), then you'd save another £168.
Meaning, because pension payments are made before tax & NIC's are deducted, a £1,400 gross contribution will cost you a maximum net of £1,120(just tax relief) and a minimum net of £952(tax relief and PSE). The government would pay the difference.

For anyone wanting to give their pension a nice boost, it's a no-brainer, even without the benefit of PSE.

NIC''s are paid at a rate of 12% on earnings between £242 and £967 per week, and at 2% on earnings above that.
So if you take the cash and pay income tax and NIC's on it, and then drip feed it back into your pension/AVC over a few months, you won't actually be gaining very much.
Aswell as the tax relief, you'll be paying 2% NIC's on some of the lump sum on the way out, but gaining 12% NIC's on the way back in. A smaller gain than just the tax relief on the lump sum option!

You could then ask pensions to make a £1,400 withdrawal from your pension. You will be charged 25% tax (I believe) - so £1,050 would go into your bank account.

This would represent a 'gain' of £98 [1050-952]

Not giving this as advice at all. Would value Robert's opinion on this regards the maths.

Your Flexiplan or RMDCP are not bank accounts, you can't just withdraw money from them at will.

But in the case of Flexiplan, you have the potential to take all of the balance out tax free at the point of taking your NRA60 pension, as long as it's not more than 25% of pot value.

With the RMDCP, you would have to transfer the total pot to another DC pension and initiate drawdown, as long as you're 55+. When you access it, the first 25% would be tax free and the remainder classed as income and come under normal PAYE tax rules. Depending on what other income you have, some or all of that could potentially be accessed tax free too.

[RobertT]

I'm in the process of waiting for Capita to sort out my pension and AVC , hopefully to be paid first week in November..paying any extra now could slow down or confuse the situation? Just to save a few hundred in tax ??

If are you still contributing on a weekly/monthly basis, I'm not sure a lump sum would be any different.

[Wullie10]

Not sure how they work it all out ? How do they get an exact AVC figure to pay out on time alongside the NRA60 pension? I'm guessing the AVC is paid out some time after the main pension ?

[RobertT]

Not sure how they work it all out ? How do they get an exact AVC figure to pay out on time alongside the NRA60 pension? I'm guessing the AVC is paid out some time after the main pension ?

It might depend on where the money is invested to some degree.
But based on previous posters on this forum, they do sometimes pay out roughly 90% of the AVC funds at the time of the first pension payment.
Then once the funds have been divested and an exact value is known, the remaining 10% will follow a number of weeks later.

[derricksmyth]

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

I just rang pensions and they couldn't tell me, they said to ring wages but they close at 3. Will try them tomorrow!

How can pensions not know that ?

I know it's crazy, I dialed the 03456030043 number

You might find, as I did when trying to find out the threshold for remaining within PSE, that they will tell you it constitutes financial advice and therefore they are unable to tell you.

Another stupid rule that prevents people getting information when the need it

I rang wages this morning and waiting for their pension expert to get back to me. Will let you know

Well wages have got back to me and unfortunately I am not permitted to upload the reply, shame.
Basically they are are saying it is impossible to tell me until after I am paid, but paying £1000 into my AVC will fall outside the NMW, whatever that is, and the threshold for reduced NI. So maybe you will only get the reduced NI on the first £100 or so. Of course you will still get the tax relief.

[stevejm]

As Robert has pointed out - we will have to pay 12% NIC on the £1400. This is £168

If you paid in £1750 to your pension - then you would be charged the £1400 of the bonus. You would avoid paying 20% tax on £1,400 and £168 NIC
End result you have £1,400 in your pension as opposed to £952 into your bank account.

That's more or less correct, although I'm not sure where you get the £1,750 from.

If you made a £1,400 gross AVC, your income tax would reduce by £280 and if you benefit from PSE too(unknown at the time of writing), then you'd save another £168.
Meaning, because pension payments are made before tax & NIC's are deducted, a £1,400 gross contribution will cost you a maximum net of £1,120(just tax relief) and a minimum net of £952(tax relief and PSE). The government would pay the difference.

For anyone wanting to give their pension a nice boost, it's a no-brainer, even without the benefit of PSE.

NIC''s are paid at a rate of 12% on earnings between £242 and £967 per week, and at 2% on earnings above that.
So if you take the cash and pay income tax and NIC's on it, and then drip feed it back into your pension/AVC over a few months, you won't actually be gaining very much.
Aswell as the tax relief, you'll be paying 2% NIC's on some of the lump sum on the way out, but gaining 12% NIC's on the way back in. A smaller gain than just the tax relief on the lump sum option!

You could then ask pensions to make a £1,400 withdrawal from your pension. You will be charged 25% tax (I believe) - so £1,050 would go into your bank account.

This would represent a 'gain' of £98 [1050-952]

Not giving this as advice at all. Would value Robert's opinion on this regards the maths.

Your Flexiplan or RMDCP are not bank accounts, you can't just withdraw money from them at will.

But in the case of Flexiplan, you have the potential to take all of the balance out tax free at the point of taking your NRA60 pension, as long as it's not more than 25% of pot value.

With the RMDCP, you would have to transfer the total pot to another DC pension and initiate drawdown, as long as you're 55+. When you access it, the first 25% would be tax free and the remainder classed as income and come under normal PAYE tax rules. Depending on what other income you have, some or all of that could potentially be accessed tax free too.

Thanks very much Robert. I'm 62 yrs old with RMDCP

Where are the forms to fill in?

[derricksmyth]

As Robert has pointed out - we will have to pay 12% NIC on the £1400. This is £168

If you paid in £1750 to your pension - then you would be charged the £1400 of the bonus. You would avoid paying 20% tax on £1,400 and £168 NIC
End result you have £1,400 in your pension as opposed to £952 into your bank account.

That's more or less correct, although I'm not sure where you get the £1,750 from.

If you made a £1,400 gross AVC, your income tax would reduce by £280 and if you benefit from PSE too(unknown at the time of writing), then you'd save another £168.
Meaning, because pension payments are made before tax & NIC's are deducted, a £1,400 gross contribution will cost you a maximum net of £1,120(just tax relief) and a minimum net of £952(tax relief and PSE). The government would pay the difference.

For anyone wanting to give their pension a nice boost, it's a no-brainer, even without the benefit of PSE.

NIC''s are paid at a rate of 12% on earnings between £242 and £967 per week, and at 2% on earnings above that.
So if you take the cash and pay income tax and NIC's on it, and then drip feed it back into your pension/AVC over a few months, you won't actually be gaining very much.
Aswell as the tax relief, you'll be paying 2% NIC's on some of the lump sum on the way out, but gaining 12% NIC's on the way back in. A smaller gain than just the tax relief on the lump sum option!

You could then ask pensions to make a £1,400 withdrawal from your pension. You will be charged 25% tax (I believe) - so £1,050 would go into your bank account.

This would represent a 'gain' of £98 [1050-952]

Not giving this as advice at all. Would value Robert's opinion on this regards the maths.

Your Flexiplan or RMDCP are not bank accounts, you can't just withdraw money from them at will.

But in the case of Flexiplan, you have the potential to take all of the balance out tax free at the point of taking your NRA60 pension, as long as it's not more than 25% of pot value.

With the RMDCP, you would have to transfer the total pot to another DC pension and initiate drawdown, as long as you're 55+. When you access it, the first 25% would be tax free and the remainder classed as income and come under normal PAYE tax rules. Depending on what other income you have, some or all of that could potentially be accessed tax free too.

Thanks very much Robert. I'm 62 yrs old with RMDCP

Where are the forms to fill in?

They are on the people app, there is a tile named Lump Sums and AVC s

[stevejm]

Thanks Derrick

[posted]

IMG_3531.jpeg

Why have they set a deadline before they/we know the amount. If it’s expected to be at least £900 but turns out to be a lot more, maybe I’ll want to put the full lot in.

This deadline is just to give them enough time to process it, which I’m sure will be a mammoth task even if just 5% of staff take up the offer.

[yellowbelly]

IMG_3531.jpeg

Why have they set a deadline before they/we know the amount. If it’s expected to be at least £900 but turns out to be a lot more, maybe I’ll want to put the full lot in.

This deadline is just to give them enough time to process it, which I’m sure will be a mammoth task even if just 5% of staff take up the offer.

IMHO don't think it'll be megabucks more, loads of people would have needed to leave before the qualifying date
to substantially increase the amount from the escrow fund (which RM/CWU and the pension trustees must have known
what is/was in it to have come up with the estimate in the first place). I think we'll be very lucky if it's a fiver more!

[pumi63]

Hello everybody ,

Im sure im repeating what learned members have already mentioned but it is ? max. 85% of the lumpsum payment ( 500+900 ) although it may be more depending on EVR takeup .

My question although off-topic concerns the Scottish Widows AVC scheme Money4Life and the 7 funds that you decide to pay into and the amounts .

I cannot find any advice about suggested funds that are better options than others for investment and i appreciate that any advice is non-binding etc and its all at your own risk but it would help a lot of members not throwing good money into bad funds and end up making losses on a weekly basis because the total weekly fund value doesn't reflect what you've put in .

I emailed Scottish Widows but have had no response either so could any fund savvy folks advise on a fund or a collection of funds and suggested ratio of amounts to invest to enable some return at retirement else its bread , water and food-bank time , not lol.

Thank you

Pum

[RobertT]

The only place you're going to get proper advice is with an IFA. People on here can only really give you their opinions.

In practice, a good investment choice for one person isn't necessarily good for another, due to age, attitude to risk, etc.

My opinion is, if you don't want to pay for advice, then use all the information at your disposal and make the best informed choice you can.

A few people might be along to give their opinions in due course. Plus the 'guide to AVC's' on the RMPP website is very informative, and there's also the fund performance fact sheets. See the 'pension websites' stickie for the links.

[posted]

Hello everybody ,

Im sure im repeating what learned members have already mentioned but it is ? max. 85% of the lumpsum payment ( 500+900 ) although it may be more depending on EVR takeup .

My question although off-topic concerns the Scottish Widows AVC scheme Money4Life and the 7 funds that you decide to pay into and the amounts .

I cannot find any advice about suggested funds that are better options than others for investment and i appreciate that any advice is non-binding etc and its all at your own risk but it would help a lot of members not throwing good money into bad funds and end up making losses on a weekly basis because the total weekly fund value doesn't reflect what you've put in .

I emailed Scottish Widows but have had no response either so could any fund savvy folks advise on a fund or a collection of funds and suggested ratio of amounts to invest to enable some return at retirement else its bread , water and food-bank time , not lol.

Thank you

Pum

Each to their own but I joined the DC scheme back in December 2010.
Have always contributed top tier plus 4% AVC into the Shariah fund.
It has performed very well for me. The worse performing year was last year (2022) when the price/share dropped 11.3%.
But as I’m buying long term - although very annoyed it will be replaced by the new scheme next year - it’s a good long term play.
The first share I bought 12.5 years ago was £6.47, now trading at just over £31.

Over the years my total net contribution (factoring in Tax and NI savings) is £34k. My pot stands at just over £200k today, after fees.

Each fund has its own document which gives an idea of where it’s invested and what the fees are.

[Dorset Plodder]

All very interesting guys

Bottom line ... using all my fingers and toes I make 85% of £1400 = £1190 is that going to be the sum I have to put in the authorisation box? I'm not interested in what I'm saving or making, I just want to put the max in.

I don't want to mess this up as it was hard enough press ganging a teenager into emailing and printing the form off, I think they could have made it a bit more user friendly

A general point ... not many people even seem to know about this in my DO .... perhaps they're too busy rushing off to book their holiday?

[Hyrrokkin]

All very interesting guys

Bottom line ... using all my fingers and toes I make 85% of £1400 = £1190 is that going to be the sum I have to put in the authorisation box? I'm not interested in what I'm saving or making, I just want to put the max in.

I don't want to mess this up as it was hard enough press ganging a teenager into emailing and printing the form off, I think they could have made it a bit more user friendly

A general point ... not many people even seem to know about this in my DO .... perhaps they're too busy rushing off to book their holiday?

I was wondering that myself - do we put in the max if that is what we want and they deduct 15% automatically ?