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Lump sums into avc

25 Feb 2020, 10:30

Can any one correct me if I'm I'm wrong.
When I collect my nra60 in Oct. I'm thinking of paying into avc for my nra65 as I will still be working.
Reason behind this is so to reduce my tax as I could be paying higher rate, I'm assuming then when I get round to collecting my nra65 I can convert the avc money into pension? Thanks

Lump sums into avc

25 Feb 2020, 14:10

A few points spring to mind:

1. To be paying higher rate tax at 40% you need to be earning over £50,000 per year.

2. You could fall foul of pension recycling rules: https://www.pensionsadvisoryservice.org ... -recycling

3. You can't directly convert your AVC cash into more RM pension, you have to buy an annuity!
At 65 you can expect to get rates of about 5% for a single life level income. Less if you want death benefits and/or inflationary increases.
I think RM's preferred annuity provider is Hargreaves Lansdown, their current rates are here: https://www.hl.co.uk/retirement/annuiti ... -buy-rates

4. We may not be able to pay into the current AVC's once the CDC scheme starts.

5. Payments into AVC's now have to be via payroll, so no lump sum payments are allowed.
Last edited by RobertT on 25 Feb 2020, 16:58, edited 2 times in total.

Lump sums into avc

25 Feb 2020, 14:34

RobertT wrote:
2. You could fall foul of pension recycling rules: https://www.pensionsadvisoryservice.org ... -recycling



Such a grey area that would be very hard for HMRC to prove. I've just gone through the 6 conditions and only 4 would apply to me. You could get away with it by saying it wasn't pre-planned (prove it HMRC) and the AVC will be worth less than 30% of the NRA60 tax free lump sum. Plus technically he isn't using his tax free lump sum to increase his pension as he will still be working then he is using his future wages which will be easy to prove if done through payroll which I presume it will be.

Lump sums into avc

25 Feb 2020, 16:58

Yes pension recycling is a very grey area, but just trying to touch every base.

Lump sums into avc

26 Feb 2020, 03:23

Recycling of lump sums is indeed a grey area, but i believe putting unrequired income from our db pension into a money purchase pension would not fall foul of the MPAA. Hope not, because that is part of my plan whilst in receipt of NRA 60 pension

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