Calculation of max AVC amount

O

Olympian

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I'm about to make a lump sum AVC for the 2006 tax year. My P60 says my total pay was 63528 and I made contributions of 3934.7 throught payroll during 2006.

Am I correct in thinking I can make an AVC for (63528 / 5) - 3934.74 = 8770.86 (before tax relief)?

I'm in the 30 - 40 age bracket so max contribution is 20%.

Thanks.
 
Yes your calculations are correct. Only other thing to watch is that you're not over-funding but that's very rare in your 30s.
 
Not sure if this is correct so stand corrected but doesn't Pay on the P60 mean the amount liable to tax. If it does then you have to add your contributions to the P60 figure to get your gross pay so the calc is (63528+3934.74)/5 - 3934.74
 
irishgolfer said:
How can you overfund a pension if you are allowed to put in 20% per year of your gross earning?
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If the employer is providing a good pension already (e.g. 2/3rds final salary, index-linked plus spouse benefits), adding 20% of your own as well could easily lead to overfunding.
 
If this is an AVC (Additional Voluntary Contribution) then:
  • it means you are a member of an occupational pension scheme
  • if you already contribute a member contribution as part of that scheme, then this must be taken into account in calculating the 20%
  • depending on the benefits provided under the main scheme, you could be overfunding by contributing AVCs. The scheme advisors should clarify this for you.
 
irishgolfer said:
How can you overfund a pension if you are allowed to put in 20% per year of your gross earning?
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In an Occupational Pension Scheme, as well as the percentage limits on personal contributions, there are seperate limits on the maximum size of pension you can receive at retirement.
 
If the employer is providing a good pension already (e.g. 2/3rds final salary, index-linked plus spouse benefits), adding 20% of your own as well could easily lead to overfunding.
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Very few schemes will provide a pensions as discribed above.
Most provide for 1/60 for each year worked up to a max of 40 years less the state pension. Spouses pensions are also at best 2/3 of your pension.
I'm sure there are many more

You need to check with the trustees.

As revenue allow you to have a pension of 2/3 of your P60 salary, you can make up any shortfalls by contributing AVC's
 
It's a DC type scheme and not particularly generous hence my desire to increase my funding.

asdfg said:
Not sure if this is correct so stand corrected but doesn't Pay on the P60 mean the amount liable to tax. If it does then you have to add your contributions to the P60 figure to get your gross pay so the calc is (63528+3934.74)/5 - 3934.74
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This would allow me a contribution of 9557.80 rather than 8770.86.

The text on the P60 says "Total pay (i.e. gross pay less any superannuation contributiions allowable for income tax purposes)...."

This also gives an explanation of the P60

If I contribute the larger amount and it's too much does the differrence carry forward to 2007 tax year?
 
If I contribute the larger amount and it's too much does the differrence carry forward to 2007 tax year?
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Afaik yes provided there is no deliberate overfunding.
 
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