You set the amount you wish to contribute and it is deducted from your salary before tax is deducted; as a basic rate tax-payer, if you contribute £80, the £20 of tax you would have paid on £100 income is put into your pot also. It is flexible so you can start and stop the contribution, or alter the level, to suit your circumstances.
This is a separate arrangement from your TPS benefits, but you must be a member of the TPS to contribute to the Teachers' AVC scheme. You do not have to take you TAVC benefits at the same time as your main scheme benefits; you can access your pot any time from the minimum pension age, currently age 55, and by your 75th birthday.
You can take up to 25% of your TAVC pot as tax free cash; the remaining 75% is taxable. From 6th April 2015, Teachers' AVC (TAVC) members can take advantage of the new 'freedom' flexibilities and will be able to:
- Fully withdraw the whole TAVC in one go, with 25% as a tax free lump sum and the rest as a taxable lump sum.
- Partially withdraw only part of the TAVC, leaving the remainder invested, again with the first 25% of each payment tax free and then the remaining 75% taxable. This option allows teachers to 'spread 'the number of years over which they access their TAVC fund.
- Opt for Flexi Access Drawdown or non-lifetime annuity, i.e. take up to 25% as a tax free lump sum and move the balance to a Flexi Access Drawdown plan outside of the TAVC, after which time teachers can drawdown a regular taxable income, defer taking it or buy an annuity product, including non-lifetime annuities, either immediately or at a later date.
- Opt for a Lifetime Annuity, i.e. take up to 25% as a tax free lump sum and use the rest to provide a guaranteed regular taxable income (as before).
Prudential will be able to provide you with more information on the Teachers' AVC and your options, click here for their website.
The government has set up Pensionwise, a website giving you more information about the pension flexibilities in general. ATL strongly recommends that you take independent financial advice and should consider all of your options before making a decision. This includes shopping around on the open market.