Due to an unexpected bonus, I have hit full pension Tapered Annual Allowance for 2017/18 and have already exceeded the £10k by a few £k.
And thanks to sterling dropping on the referendum, and LTA reducing, I have also exceeded LTA by about £80k.
I'm 55 mid March and may need my PCLS before April 5th (it's complicated!) so might not even be able to benefit from the larger LTA.
Moving a pot to a provider that allows scheme pays for the just under £2k that I calculate is due for exceeding TAA would help. I have one pot with BestInvest who've already said "no" and one with Aviva, who haven't responded. I can easily move the latter to anywhere suitable.
All feedback welcome
Got a credit card? use our Credit Card & Finance Calculators
Thanks to gpadsa,Steffers0,lansdown,Wasron,jfgw, for Donating to support the site
DC provider that allows Voluntary Scheme Pays
-
- Lemon Pip
- Posts: 91
- Joined: November 25th, 2016, 10:30 am
- Has thanked: 3 times
- Been thanked: 2 times
-
- Lemon Slice
- Posts: 555
- Joined: November 10th, 2016, 10:04 am
- Has thanked: 65 times
- Been thanked: 158 times
Re: DC provider that allows Voluntary Scheme Pays
gadgetmind wrote:Due to an unexpected bonus, I have hit full pension Tapered Annual Allowance for 2017/18 and have already exceeded the £10k by a few £k.
And thanks to sterling dropping on the referendum, and LTA reducing, I have also exceeded LTA by about £80k.
I'm 55 mid March and may need my PCLS before April 5th (it's complicated!) so might not even be able to benefit from the larger LTA.
Moving a pot to a provider that allows scheme pays for the just under £2k that I calculate is due for exceeding TAA would help. I have one pot with BestInvest who've already said "no" and one with Aviva, who haven't responded. I can easily move the latter to anywhere suitable.
All feedback welcome
The AJ Bell SIPP allows Voluntary Scheme Pays (but charges an admin fee of £75 in addition to the AA tax due). See https://www.investcentre.co.uk/sites/default/files/AJBIC_Scheme-pays_0.pdf
If you have exceeded the tapered annual allowance for 2017/18, you don't have to pay the charge until Jan 2019. Could you pay it from the PCLS you will get next year?
-
- Lemon Slice
- Posts: 582
- Joined: November 4th, 2016, 12:57 pm
- Has thanked: 135 times
- Been thanked: 299 times
Re: DC provider that allows Voluntary Scheme Pays
DrBunsenHoneydew wrote:The AJ Bell SIPP allows Voluntary Scheme Pays ...
Thanks for the heads-up. I had no idea YouInvest offered this feature.
I take issue with one part of the AJ Bell's paper you linked to, though. They state that "An important point to remember is that the Annual Allowance Charge is not penal, it is simply reclaiming the tax relief that the individual is not entitled to above the Annual Allowance."
That would be true only if the contribution itself did not have to remain inside the pension. But because it does, it is again taxable on withdrawal. If you cannot use Scheme Pays this is pure double-tax, and 'penal'. If you can use Scheme Pays the result is slightly less bad, but you still end up paying tax again on what is now effectively post-tax income, also 'penal'.
Putting numbers on this, on the likely average case without Scheme Pays, 40% not relieved on the way in and 25% tax free and 20% tax on the remainder on withdrawal produces a blended rate of 55%, worse than not having made the pension contribution at all. In the worst case, 60% tax not relieved on the way in and 55% lifetime allowance penalty rate on the way out, for a 115% tax rate, most definitely penal.
Over the decade since 'pension simplification', pensions have morphed from reasonably straightforward tax-deferred retirement savings vehicles into potentially treacherous tax traps for the unwary and for higher rate tax taxpayers. No signs of any improvements on the horizon either, just plenty of media speculation on how they could become even worse.
-
- Lemon Pip
- Posts: 91
- Joined: November 25th, 2016, 10:30 am
- Has thanked: 3 times
- Been thanked: 2 times
Re: DC provider that allows Voluntary Scheme Pays
I asked HL if they provided it and they said it's only the scheme into which you "over paid" that can do it, so I'll try Aviva with close to zero hope.
Paying the charge isn't the issue, it's trying to make it as tax efficient as I can that's the point of the exercise. Between this charge and the (almost certain) one for exceeding LTA, I'm going to be seeing £20k less in my pension, which ticks me off somewhat.
Paying the charge isn't the issue, it's trying to make it as tax efficient as I can that's the point of the exercise. Between this charge and the (almost certain) one for exceeding LTA, I'm going to be seeing £20k less in my pension, which ticks me off somewhat.
-
- Lemon Pip
- Posts: 91
- Joined: November 25th, 2016, 10:30 am
- Has thanked: 3 times
- Been thanked: 2 times
Re: DC provider that allows Voluntary Scheme Pays
Wow, a mere three weeks after being asked, Aviva came back asking which tax year I wanted the scheme pays forms for, and said that 2017/18 could only be issued after this year year has ended.
I'm "somewhat surprised" !
I'm "somewhat surprised" !
-
- Lemon Slice
- Posts: 555
- Joined: November 10th, 2016, 10:04 am
- Has thanked: 65 times
- Been thanked: 158 times
Re: DC provider that allows Voluntary Scheme Pays
gadgetmind wrote:Wow, a mere three weeks after being asked, Aviva came back asking which tax year I wanted the scheme pays forms for, and said that 2017/18 could only be issued after this year year has ended.
I'm "somewhat surprised" !
Are you saying they have agreed to allow Voluntary Scheme Pays?
-
- Lemon Pip
- Posts: 91
- Joined: November 25th, 2016, 10:30 am
- Has thanked: 3 times
- Been thanked: 2 times
Re: DC provider that allows Voluntary Scheme Pays
I clearly asked about voluntary scheme pays and Taper Annual Allowance, they said just "scheme pays" in their reply leaving some room for doubt, but it sounds like they allow it.
Return to “Pensions - Practical Problems”
Who is online
Users browsing this forum: No registered users and 15 guests