The Lemon Fool

I am now approaching 55 and have 60K in AVCs on top of my company pension.
I am not in great health. I'm not going to get old.

I was considering taking my AVCs at age 55, extracting 25% and putting the rest in drawdown. I could take as much as £3500 per annum and whilst still working I would of course pay tax on that.

But I read something that I had never heard of before and did not understand. That is - by doing this I could limit the amount myself and my employer could add to my company pension pot.

Can anyone shed light please?

Thanks

PingPong wrote: But I read something that I had never heard of before and did not understand. That is - by doing this I could limit the amount myself and my employer could add to my company pension pot.

You need to check the rules for "Lifetime Allowance". But broadly speaking, the ability to take money out of one pension plan and put it back in another, or even appear to be doing this, has been seriously restricted.

Add it to a list of why, if there's a choice, ISAs may work better than AVCs.

It is not just the Lifetime Allowance (LTA) ruels that you need to check.

The moment you crystalize a pension (as in when you use the value for measurement to see how much LTA you have used, and a necessary step to take 25% Lump sum tax free), you then become limited to 10k contributions per year.
The moment you then take further drawdown benefits, you are limited to 4k contributions into other pensions.
I think you can make more contributions, but these are the limits for tax relief.

The above are the highlights as I remember them. Do not take this as the accurate position, as the rules seem to be changing all the time, but check them out yourself. Suggest you start with the HMRC website, unless anyone else here can suggest a suitable summary

Hi PingPong - you will need to check your company pension scheme rules as well as you may not be able to draw the AVC without having to draw the main company pension at the same time. You could of course re-start a new company pension if you continue to work, but in the above example - as TUK020 mentions above - you would be restricted to £4k p.a. as new pension contributions from all sources.

If the pension scheme rules allow you to just take the AVC and you draw just 25% TFC under a flexible access drawdown arrangement then your Annual Allowance remains at £40k. It is again restricted to £4k if you draw under an UFPLS arrangement, or drew income from the AVC as well as tax-free cash.

Cheers, OLTB.

Thankyou for your replies.

I can indeed take my AVCs seperate to my company pension. As to the rest I will have to find out.

Cheers again

What you need to find out about is the Money Purchase Annual Allowance, which as others have said, restricts future money purchase contributions once you have taken benefits from a money purchase scheme.