Max AVC contributions?

itinerant · Post by **itinerant** » 05 May 2019, 08:37

Can anyone give me an idea of how much i can pay in AVCs through PSE as I read there is a limit around effective minimum wage? Is there a calculation I can use to work the maximum amount out?

I have been with RM 18 months (30 hours a week contract) and am in the DC Scheme paying the max 6% pension contributions.

I am not taking any other benefits through MyBundle.

My plan is working 7 more years with the option of retiring at 55 as have other pensions from previous employment (mix of DB and Private Pensions + savings) so the RM pension will be a small part my "pot" but I want to get the maximum benefit of the tax/ni aspect by paying into AVCs (I know the CDC scheme may be around the corner but I will review the situation again when that happens).

Thanks.

heapsy · Post by **heapsy** » 05 May 2019, 11:05

Your hourly rate of pay, AFTER your AVC deductions must NOT fall below the National Minimum Wage rate. I'm not sure how much that is, so you would have to check online. I'm on 38 hours. I have recently increased my contributions by £2 per week. I pay £2.88 fixed payment into Bonus plan. Plus another £118 paid into Flexi plan, this is spread across 3 different funds. So a total of £120.88 per week. I have remained within PSE, so pay reduced N.I. contributions. With that in mind, a rough calculation tells me you could pay £95 per week, and stay within PSE. That should give a little breathing space between what you pay, and the absolute maximum you can pay. You cannot include shift allowances to calculate your payments, as these are not part of your HOURLY rate as such. I hope that helps, I did fall out of PSE for a few random weeks, as was paying too much, and my hourly take home pay dropped below the National Minimum Wage. Another advantage to AVCs is that your take home pay will increase, as you tax liability is lower.

itinerant · Post by **itinerant** » 05 May 2019, 14:53

heapsy wrote:Your hourly rate of pay, AFTER your AVC deductions must NOT fall below the National Minimum Wage rate. I'm not sure how much that is, so you would have to check online. I'm on 38 hours. I have recently increased my contributions by £2 per week. I pay £2.88 fixed payment into Bonus plan. Plus another £118 paid into Flexi plan, this is spread across 3 different funds. So a total of £120.88 per week. I have remained within PSE, so pay reduced N.I. contributions. With that in mind, a rough calculation tells me you could pay £95 per week, and stay within PSE. That should give a little breathing space between what you pay, and the absolute maximum you can pay. You cannot include shift allowances to calculate your payments, as these are not part of your HOURLY rate as such. I hope that helps, I did fall out of PSE for a few random weeks, as was paying too much, and my hourly take home pay dropped below the National Minimum Wage. Another advantage to AVCs is that your take home pay will increase, as you tax liability is lower.

Thanks for the info heapsy, that's really useful. I have run the numbers and £95 sounds right to me based on my wage slip (excluding shift allowances as you say). Cheers.