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AVCs

16 Nov 2017, 20:39

Hi there,first time on here...wondered if anyone has got or had Avc’s with Royal Mail? I’ve heard conflicting reports about what you can & cant do with them.I’m thinking about cashing mine next year...any help/advice would be welcome..thanks


AVC’s

16 Nov 2017, 23:09

261184 wrote:Hi there,first time on here...wondered if anyone has got or had Avc’s with Royal Mail? I’ve heard conflicting reports about what you can & cant do with them.I’m thinking about cashing mine next year...any help/advice would be welcome..thanks


From my own point of view, my AVC investments will enable me to maximize my forthcoming pension from RM without the need to turn any of said pension into a tax-free lump sum. I'm glad I had the sense to put money into AVCs for quite a long time.

Are you retiring next next?

AVC’s

17 Nov 2017, 05:48

261184 wrote:Hi there,first time on here...wondered if anyone has got or had Avc’s with Royal Mail? I’ve heard conflicting reports about what you can & cant do with them.I’m thinking about cashing mine next year...any help/advice would be welcome..thanks

The usual use of AVC’s is to fund the tax free lump sum when taking your main pension benefits, which is particularly useful for Section C members because they don’t get one as standard.

It is also possible to transfer out and into a personal pension, or if you’re over 55 you can access the money under ‘pension flexibility’. But both would mean that more of your AVC pot is likely to be taxable.

There’s lots of info on AVC’s here: https://www.royalmailpensionplan.co.uk/ ... nsion-avcs

AVC’s

20 Nov 2017, 19:46

BeamishStout wrote:
261184 wrote:Hi there,first time on here...wondered if anyone has got or had Avc’s with Royal Mail? I’ve heard conflicting reports about what you can & cant do with them.I’m thinking about cashing mine next year...any help/advice would be welcome..thanks


From my own point of view, my AVC investments will enable me to maximize my forthcoming pension from RM without the need to turn any of said pension into a tax-free lump sum. I'm glad I had the sense to put money into AVCs for quite a long time.

Are you retiring next next?

Thanks for replying...appreciated

AVC’s

20 Nov 2017, 19:52

261184 wrote:
BeamishStout wrote:
261184 wrote:Hi there,first time on here...wondered if anyone has got or had Avc’s with Royal Mail? I’ve heard conflicting reports about what you can & cant do with them.I’m thinking about cashing mine next year...any help/advice would be welcome..thanks


From my own point of view, my AVC investments will enable me to maximize my forthcoming pension from RM without the need to turn any of said pension into a tax-free lump sum. I'm glad I had the sense to put money into AVCs for quite a long time.

Are you retiring next next?

Thanks for replying...appreciated

I've done 33 yrs as u can tell by my login...my biggest frustration was my quote in Sept on where my pension is £6,300 a year!! The lump sum was Ok... I was 56 in Sept, I've got a reasonable chunk in my AVC but wondered what difference it would make to my yearly pension if I used my AVC money eventually for my lump sum...I've probably got another year to do to top the AVC up to amount I'd be happy with

AVCs

21 Nov 2017, 06:46

With 33 years’ service, you’re in Section B of the RMPP and get a lump sum as standard. So you will have 3 choices with your AVC funds:

1. Use your AVC’s along with the standard lump sum, to fund the maximum 25% lump sum allowable.
2. Give up some or all of your standard lump sum in return for a higher guaranteed pension, with the AVC's making up the rest of the lump sum.
3. Use your AVC’s as a separate pot and buy an annuity or draw it down.

To work out roughly what the total value of your RM pension benefits are, use this formula:

Yearly pension x 20 + standard lump sum(section B) + AVC’s = total value

Then simply divide by 4 to get the maximum 25% tax free lump sum that’s allowable.
But don’t forget to factor in the 5% per year reductions for taking your pension/s before the normal retirement ages of 60 and 65.

AVCs

29 Nov 2017, 14:48

RobertT wrote:With 33 years’ service, you’re in Section B of the RMPP and get a lump sum as standard. So you will have 3 choices with your AVC funds:

1. Use your AVC’s along with the standard lump sum, to fund the maximum 25% lump sum allowable.
2. Give up some or all of your standard lump sum in return for a higher guaranteed pension, with the AVC's making up the rest of the lump sum.
3. Use your AVC’s as a separate pot and buy an annuity or draw it down.

To work out roughly what the total value of your RM pension benefits are, use this formula:

Yearly pension x 20 + standard lump sum(section B) + AVC’s = total value

Then simply divide by 4 to get the maximum 25% tax free lump sum that’s allowable.
But don’t forget to factor in the 5% per year reductions for taking your pension/s before the normal retirement ages of 60 and 65.
Thank you RobertT..appreciated very much

AVC’s

30 Mar 2018, 16:23

BeamishStout wrote:
261184 wrote:Hi there,first time on here...wondered if anyone has got or had Avc’s with Royal Mail? I’ve heard conflicting reports about what you can & cant do with them.I’m thinking about cashing mine next year...any help/advice would be welcome..thanks


From my own point of view, my AVC investments will enable me to maximize my forthcoming pension from RM without the need to turn any of said pension into a tax-free lump sum. I'm glad I had the sense to put money into AVCs for quite a long time.

Are you retiring next next?
Hi there,not sure when I can go just yet.When I've phoned up the Pension dept they say they can't even give me an estimate of what difference my AVC money will make!! Very frustrating, reading what you've put above I'm presuming that if you make up most or all of your lump sum with your own AVC money RM then gives you a higher pension? But again how much is that likely to be?

AVC’s

02 Apr 2018, 11:08

261184 wrote:Hi there,not sure when I can go just yet.When I've phoned up the Pension dept they say they can't even give me an estimate of what difference my AVC money will make!! Very frustrating, reading what you've put above I'm presuming that if you make up most or all of your lump sum with your own AVC money RM then gives you a higher pension? But again how much is that likely to be?

You’re in section B, so you need to work out how much your standard lump sum and your AVC’s combined equal in percentage terms in relation to your overall pot. Do that using the formula I provided in an earlier post.

If that combined total is more than 25% of your total pot, then I believe you have 3 options:

1. Take the excess as taxable cash
2. Transfer the excess to another pension scheme for drawdown or annuity purchase.
3. Commute some of your standard lump sum into more pension, so that what’s left from that and the AVC’s equals no more than 25% of your overall pot.

Alternatively you also have the choice of transferring all of your AVC’s into another pension arrangement for drawdown or annuity purchase.

If you want to do the 3rd option above and from a post I remember from a number of years ago, I think the commutation rate for exchanging a section B lump sum to pension is around 1:24. Which means for every £24 of lump sum you’re giving up you’ll get another £1 added onto your yearly pension.*
Perhaps someone with personal experience can confirm that?

Also, factor the lump sum you’re accruing via the DBCBS and when you plan to access it, assuming you’ve joined up to that transitional scheme.

*I think the commutation rate for section C members of exchanging pension to lump sum is more in the region of 1:18 or 1:20.

AVC’s

02 Apr 2018, 11:47

RobertT wrote:
261184 wrote:Hi there,not sure when I can go just yet.When I've phoned up the Pension dept they say they can't even give me an estimate of what difference my AVC money will make!! Very frustrating, reading what you've put above I'm presuming that if you make up most or all of your lump sum with your own AVC money RM then gives you a higher pension? But again how much is that likely to be?

You’re in section B, so you need to work out how much your standard lump sum and your AVC’s combined equal in percentage terms in relation to your overall pot. Do that using the formula I provided in an earlier post.

If that combined total is more than 25% of your total pot, then I believe you have 3 options:

1. Take the excess as taxable cash
2. Transfer the excess to another pension scheme for drawdown or annuity purchase.
3. Commute some of your standard lump sum into more pension, so that what’s left from that and the AVC’s equals no more than 25% of your overall pot.

Alternatively you also have the choice of transferring all of your AVC’s into another pension arrangement for drawdown or annuity purchase.

If you want to do the 3rd option above and from a post I remember from a number of years ago, I think the commutation rate for exchanging a section B lump sum to pension is around 1:24. Which means for every £24 of lump sum you’re giving up you’ll get another £1 added onto your yearly pension.*
Perhaps someone with personal experience can confirm that?

Also, factor the lump sum you’re accruing via the DBCBS and when you plan to access it, assuming you’ve joined up to that transitional scheme.

*I think the commutation rate for section C members of exchanging pension to lump sum is more in the region of 1:18 or 1:20.

Cheers Robert,much appreciated.Its all a bit of a mouthful, but I think I'll get an IFA to look at my figures & hopefully put it down to some actual figures I can understand.Thanks once again for replying to me

AVCs

03 Apr 2018, 21:32

Hi there, I sympathise with people who find all the pensions information confusing! I am in plan C and have left RM although I’m over 55. Ive just got my pensionoptions statement and they telling me I’ve got excess AVC after using my 25% tax free lump sum. With the excess, I don’t want an annuity. (Pays a pittance for life) or to be hammered for tax At 40 % if you are forced to take as cash like through PAYE, ( very easy if you’ve got a decent avc fund and a half decent pension.. so beware!) all I want to do is draw it down piecemeal to keep from straying into40% but the options form doesn’t allow it. I m gonna try and speak to PSC tomorrow to see if I can transfer part of my avc zurich fund to my DC scheme to reduce the excess.. will report back back.. but be careful that you don’t pay too much into avc and end up in my predicament!

AVCs

04 Apr 2018, 07:08

philip66 wrote:Hi there, I sympathise with people who find all the pensions information confusing! I am in plan C and have left RM although I’m over 55. Ive just got my pensionoptions statement and they telling me I’ve got excess AVC after using my 25% tax free lump sum. With the excess, I don’t want an annuity. (Pays a pittance for life) or to be hammered for tax At 40 % if you are forced to take as cash like through PAYE, ( very easy if you’ve got a decent avc fund and a half decent pension.. so beware!) all I want to do is draw it down piecemeal to keep from straying into40% but the options form doesn’t allow it. I m gonna try and speak to PSC tomorrow to see if I can transfer part of my avc zurich fund to my DC scheme to reduce the excess.. will report back back.. but be careful that you don’t pay too much into avc and end up in my predicament!

I’m in a similar position in that I already have 25%+ in AVC’s, although I’m still employed by RM and don’t plan to touch any of my pensions for a few years yet.

I’ve contacted the PSC on the matter previously and have received the following reply:

Should you elect to take your benefits under Option 1A the amount of AVC fund over the maximum tax free limit, as decided by HMRC, is referred to as ‘Excess AVC’.
The Excess AVC fund can be used to purchase an annuity or transfer to another provider.
Please note, the excess AVC fund does not have to be taken when activating your benefits, it can be deferred until a later stage.
You can transfer out your AVC's at any point without taking your benefits. Please write in if you require the transfer out forms.


I’m not sure if you can transfer part of your AVC fund prior to taking your benefits – but the info on the matter I've read suggests not, although I do stand to be corrected! But you can transfer just your Bonusplan and leave your Flexiplan if you choose.
I think you have to either transfer as a whole sometime beforehand or just transfer the excess once the 25% tax free amount has been taken.

Please post your reply from the PSC.

AVCs

04 Apr 2018, 13:08

Just an update on my ‘excess AVC’s issue....I’ve been in touch with the pensions advisory service, the pension service centre, and the Zurich Royal mail team this morning. As a recap, my problem was that my AVC fund was greater than the amount allowed under current rules for a 25% tax free lump sum. I received my pension options statement yesterday and if you choose the option to max out your lump sum (1A) from your avc pot, you then have the choice to either use the remaining access AVC fund to purchase an annuity or to use remaining excess AVC fund to receive a taxable lump sum payment will be taxed under PAYE principles. It’s not hard to see that on a fairly modest pension some of the excess AVC part will be taxed at 40% which isn’t a good tax planning line to take.
The process appears to be that if you choose annuity then you are sent information on the PSC preferred provider which is Hargreaves Lansdown. However under the open market options you are not under any obligation to take the HL provider without considering other annuity providers. You can also consider fixed term annuities that run for a much shorter period and return a better proportion of your excess avc pot used to fund it. This might just keep someone under the 40% tax band. As far as I am away you are under no time pressure to choose which annuity provider to go with at the point you are drawing down your main pensions benefits and receiving your AVC lump-sum so the XS AVC will remain with Zürich until you’ve decided. I hope this piece of information help someone who finds themselves in the same situation as myself but at last I finally know now what I have to do!

AVCs

04 Apr 2018, 13:35

Two points that I’d like to make regarding your post:

1. The answer is different to the same question I asked the PSC a while ago, as per my previous post.

2. If you’re transferring to HL or anybody else for that matter, all you’re doing is moving it to another pension arrangement. You should then have the choice as to whether you buy an annuity or draw it down. They are the principles of the ‘pension flexibilities’ introduced in 2015 – there should be no compulsion to purchase an annuity!

AVCs

04 Apr 2018, 14:28

I would have thought that deferring taking your pension would increase the total amount (Annual pension times 20) and so increase the 25%. Perhaps a calculation of how long you would need to defer taking your pension to be able to use your AVCs to fund the maximum 25% lump sum without any excess. After all with a reduction of 5% per year for every year you take your pension "early" would soon increase the overall pension pot.
If you are able to survive a year or two without drawing your pension this may be a better option, I do not know the figures involved but this idea sprang to mind and so I thought I would share it.

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