contributing more than limit for age-related AVC relief?

N

Ndiddy

Registered User
Messages
240
Can you contribute more funds than the limit for age-related AVC tax relief?

If you are 41, and get tax relief on 25% AVC, what happens if you send a single lump sum contribution which is more than the relief?

Thanks
 
Declare the overpayment on your tax return and you can carry it forward for tax relief in future years where you're under the limit.
 
I'm not a tax expert. I have carried one forward and claimed it about 6 years later. I understand there is no time limit.

I have a concern that the rules could be changed in the future. So I'm hesitant about carrying forward a large amount.
 
So there is no limit to contributing more than the AVC relief limit?

i.e. If you just want to invest extra funds for the long term and not deal with 8 year deemed disposal, one can just add more then 25 % at age 41 to an existing work pension? Seeing as my work DC plan allows for early retirement withdrawals at age 50, it seems like a good way to invest more for the next 9 years? The extra amount might not get tax relief but would be in a protected account until withdrawal?
 
Ndiddy said:
So there is no limit to contributing more than the AVC relief limit?

i.e. If you just want to invest extra funds for the long term and not deal with 8 year deemed disposal, one can just add more then 25 % at age 41 to an existing work pension? Seeing as my work DC plan allows for early retirement withdrawals at age 50, it seems like a good way to invest more for the next 9 years? The extra amount might not get tax relief but would be in a protected account until withdrawal?
Click to expand...

You can only take early retirement from an Occupational Pension Scheme if you are leaving the employment and severing all ties with the employer. Any AVCs must be withdrawn at the same time as your benefits from the main scheme and aggregated with the main scheme benefits. Only part of your overall fund can be withdrawn at retirement as a tax-free lump sum. The rest must be used to buy an annuity or invested in an A(M)RF. Any pension from the annuity or withdrawals from the A(M)RF will be assessed for Income Tax, USC etc.
 
LDFerguson said:
You can only take early retirement from an Occupational Pension Scheme if you are leaving the employment and severing all ties with the employer
Click to expand...

That is the plan! I would only invest extra funds for at least 10 years, it seems better to put it through my low cost index funds at work rather than start an account outside of a pension wrapper?

Between my wife and I we have 3 DC plans and decided against consolidating as this would give us the opportunity to retire 3 plans at 3 different times, as we need them...I figure as we get closer to quitting full time work, we can build up more of a cash cushion to allow us to decide when to retire each DC plan.
 
Ndiddy said:
That is the plan! I would only invest extra funds for at least 10 years, it seems better to put it through my low cost index funds at work rather than start an account outside of a pension wrapper?

Between my wife and I we have 3 DC plans and decided against consolidating as this would give us the opportunity to retire 3 plans at 3 different times, as we need them...I figure as we get closer to quitting full time work, we can build up more of a cash cushion to allow us to decide when to retire each DC plan.
Click to expand...

Make sure that you know what your Income Tax position is going to be as you retire each of the plans.

Remember that plans relating to the same employment must be retired at the same time, even if they are with different providers.
 
I thought that the funding of AVC schemes was set by the main scheme? So there is a max limit that can be put in annually?
 
Fergal19 said:
I thought that the funding of AVC schemes was set by the main scheme? So there is a max limit that can be put in annually?
Click to expand...

There's a limit on tax relief on contributions each year e.g. 25% of salary in your 40s etc., and this would include a combination of your ordinary contributions to the scheme and AVCs. If you exceed the limit you can carry the excess tax relief forward into the next tax year.

There's also a limit on overall funding of your pension scheme, relative to your salary - in broad terms funding for a pension of no more than 2/3 final salary at retirement. But in practice it's very expensive to fund for a pension of 2/3 salary with all the optional extras, so very few people risk exceeding this one.

There's also an overall limit of €2 million per person on pension funds, above which you pay lots and lots of additional tax. But again it's not a problem that too many people have to worry about.
 
Yes max pots are very difficult to attain. However if you are young and have say between 20-30 years to NRA the annual limits are going to be smaller and could easily be breached by sticking in 100k in one go.

the original poster seems to think there is no limit.

In his first post he says he is 41. Circa 24 years to go. Say his salary is 100k and is married and has no other benefits. This will give a max pot at retirement of circa 1.9m. The max annual contribution would be circa 75k.

So while the max pot looks huge the annual funding levels aren’t especially for young people.
 
Ndiddy said:
So there is no limit to contributing more than the AVC relief limit?

i.e. If you just want to invest extra funds for the long term and not deal with 8 year deemed disposal, one can just add more then 25 % at age 41 to an existing work pension? Seeing as my work DC plan allows for early retirement withdrawals at age 50, it seems like a good way to invest more for the next 9 years? The extra amount might not get tax relief but would be in a protected account until withdrawal?
Click to expand...


Move savings into pension to maximise tax free growth / avoid 8 year deemed disposal & other taxes?

My savings inside pension grow tax free. My savings outside of my pension suffer from tax. I plan to max my pension contributions over the coming years to get the maximum allowed marginal income tax relief. I have been toying with idea of contributing several years worth of "tax relief" in...
www.askaboutmoney.com

Here is the thread where I proposed this strategy 2.5 years ago. You might like to read it.
 
I think it’s a great idea. Can you imagine if at age 20 you got a gift from your parents and put it into a pension? By age 50/60 that would be some pot.

it wouldn’t even cost that much if they build the 100k gift by using the small gift exemption from the day you were born.
 
You must log in or register to reply here.
Back
Top