AVC and Pension lump sums ?

[Kingy7185]

On section C joined in 1987 and now no longer work for Royal Mail

When I am 60 next year can I take my AVC as a tax free lump sum along with additional lump sum coming from the pension ?

[heapsy]

No, unless the AVCs are less than 25% of the total. You can only take 25% tax free IN TOTAL, not on top of another.

[NWpostie]

The idea behind the AVC is to fund your lump sum preserving as much of the pension pot as possible, if you have no AVCs and took a 25% lump sum from your pot you get less pension per month and it could be the difference between managing or struggling.

[July 1981]

I’ve got a small AVC 5K and I will probably take my NRA 65 shortly, is it possible to leave the AVC were it is? Secondly how easy is it to transfer it out to a SIPP to avoid paying tax until taken?

[RobertT]

On section C joined in 1987 and now no longer work for Royal Mail

When I am 60 next year can I take my AVC as a tax free lump sum along with additional lump sum coming from the pension ?

Assuming your figures are similar to 2021(£8k pension/£22k AVC) when you asked the same question, you basically have 3 choices:

1. Take maximum lump sum, which entails reducing your pension to form the 25% tax free cash, the AVC would then be paid out with 25% of that being tax free.
2. Take maximum pension, with the AVC alone being used to fund the tax free cash.
3. A mixture of both. If the AVC isn't enough to form the 25% tax free cash, an amount of pension can be commuted to provide more lump sum.

[RobertT]

I’ve got a small AVC 5K and I will probably take my NRA 65 shortly, is it possible to leave the AVC were it is? Secondly how easy is it to transfer it out to a SIPP to avoid paying tax until taken?

AVC choices:

1. Take with NRA60/65
2. Transfer out for access any time after minimum age(currently 55).
3. Leave invested until age 75 at the latest and then transfer out.

More details available in the 'guide to AVC's' on the RMPP website.

I transferred one of my AVC's and the process was made much harder by the PSC totally ignoring my request until I made a formal complaint. Once they got their finger out and did their job, it went through fairly quickly.

Everyone's situation is going to be different, but had I taken that AVC with NRA60/65 I would have definitely paid 20% tax and probably 40% on some it it.
By transferring, it provided a bigger tax free lump sum and more to drawdown from my personal pension, most if not all of which should also be tax free.
But most importantly that extra tax free amount, made it easier to retire earlier than I would have done otherwise.

[July 1981]

Thanks Robert, that great and what I was hoping for.

[heapsy]

As we near the end of the DB pensions, I'm wondering whether it's a good idea to consolidate my AVCs and move them into the Cash fund. I've just turned 57, but don't intend on taking my pensions until NRA. Also, I might be able to take some of the Cash Balnce scheme at 60. Is there a quick way of working out how much I might be able to take?

Any answers / thoughts much appreciated.

[reedy]

Ive moved my avcs into the Lifestyle fund now As you get nearer retirement age more of your money is put into less risky investments ie cash