Q: Are there any income tax concessions on AVC contributions?
A: Yes. This is one of the attractions of an AVC facility. As with your standard pension contributions, AVCs are paid before any tax is deducted from your pay meaning that you receive relief at your highest rate of income tax. For example, if you pay tax at the basic rate of 20%, an investment of £100 in the AVC facility will cost you just £80. If you are a 40% tax payer it will cost you £60 and if you are a 45% tax payer it will cost you £55.
The Government has introduced new pension tax relief changes from 6 April 2014 by reducing the Annual Allowance from £50,000 to £40,000. The rules are quite complex and you may wish to seek independent financial advice if you think your pension savings tax relief may be restricted.
Q: How do I keep track of my AVC account?
A: You will receive fully detailed statements each year. You will also be able to see the value of your AVCs through the Pensions Portal.
Q: How do I pay?
A: Your contributions will be deducted from your salary and paid into the investment funds of your choice. Alternatively, you may wish to pay your contributions under Smart Pensions.
Q: What happens if I leave BT before taking my pension for any reason?
A: You will stop paying AVCs when you leave BT. You will then have the option to leave your AVC fund in the BT Pension Scheme and it will continue to receive investment returns. Alternatively you may choose to transfer your AVC funds to one or more alternative registered pension arrangements.
Q: If I start investing can I stop my contributions?
A: Yes, provided you give reasonable notice (normally at least two months’ written notice will be required).
Q: What should I do if I wish to contribute?
A: You can apply online through the Pensions Portal. The amount you wish to invest will be deducted regularly from your salary and tax relief will be given automatically.
Q: What happens if I die before retiring?
A: The full accumulated value of the fund will be paid to your beneficiaries, normally free of tax.
Q: Can I take a loan to pay an AVC before I retire?
A: This is likely to be regarded by HMRC as “recycling” and the benefits resulting from that payment would be taxed at 55%.
Q: Can I make a substantial AVC contribution into the BTPS before I retire?
A: There are special HMRC rules to avoid members paying substantial AVC contributions into the pension scheme shortly before they retire and you may need to seek independent financial advice as to whether the proposed payment is likely to be regarded as recycling.
If the answer you require cannot be found please contact BT Pension Services or Accenture.