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  • FIRST POST
    • jabbahut40
    • By jabbahut40 5th Jan 14, 4:07 PM
    • 216Posts
    • 51Thanks
    jabbahut40
    Prudential AVCs vs S&S ISA
    • #1
    • 5th Jan 14, 4:07 PM
    Prudential AVCs vs S&S ISA 5th Jan 14 at 4:07 PM
    Hi,

    My wife works for Glasgow City Council (Education Dept), is a lower rate tax payer in her mid 40s and is a member of the final salary Strathclyde Pension Fund. As part of her retirement planning she has been offered to invest in AVCs with Prudential. We have been looking at the list of funds available and performance offered by Prudential and are not overly impressed.

    http://www.pru.co.uk/retire/retirement_zone_localgov/home/funds/strathclyde/

    She already has a small S&S ISA which she started a few years ago (but stopped paying into) and is comfortable making her own fund selections.

    She can afford to invest approx. £100/month towards her pension and was wondering whether AVCs vs. S&S ISA would be the best way to save towards retirement.

    Any thoughts would be appreciated. Thanks,

    Jabba
Page 1
    • jem16
    • By jem16 5th Jan 14, 4:10 PM
    • 18,308 Posts
    • 10,921 Thanks
    jem16
    • #2
    • 5th Jan 14, 4:10 PM
    • #2
    • 5th Jan 14, 4:10 PM
    Hi,

    My wife works for Glasgow City Council (Education Dept), is a lower rate tax payer in her mid 40s and is a member of the final salary Strathclyde Pension Fund. As part of her retirement planning she has been offered to invest in AVCs with Prudential. We have been looking at the list of funds available and performance offered by Prudential and are not overly impressed.

    http://www.pru.co.uk/retire/retirement_zone_localgov/home/funds/strathclyde/

    She already has a small S&S ISA which she started a few years ago (but stopped paying into) and is comfortable making her own fund selections.

    She can afford to invest approx. £100/month towards her pension and was wondering whether AVCs vs. S&S ISA would be the best way to save towards retirement.

    Any thoughts would be appreciated. Thanks,

    Jabba
    Originally posted by jabbahut40
    Has anything changed since your thread on exactly the same subject 9 months ago?

    http://forums.moneysavingexpert.com/showthread.php?t=4473715&highlight=
    • jabbahut40
    • By jabbahut40 5th Jan 14, 4:22 PM
    • 216 Posts
    • 51 Thanks
    jabbahut40
    • #3
    • 5th Jan 14, 4:22 PM
    • #3
    • 5th Jan 14, 4:22 PM
    Has anything changed since your thread on exactly the same subject 9 months ago?

    http://forums.moneysavingexpert.com/showthread.php?t=4473715&highlight=
    Originally posted by jem16
    Thanks. I forgot we posted this last year...how time flies. My wife's circumstances have NOT changed since this post and embarrassed to say that due to fear (of doing the wrong thing) she has done nothing. Hoping that some help from the forum may help her make her mind and move to action.

    Jabba
    Last edited by jabbahut40; 05-01-2014 at 4:23 PM. Reason: typo
    • pip895
    • By pip895 5th Jan 14, 4:31 PM
    • 311 Posts
    • 166 Thanks
    pip895
    • #4
    • 5th Jan 14, 4:31 PM
    • #4
    • 5th Jan 14, 4:31 PM
    As she is a lower rate tax payer and already contributing to a pension I would think adding to the isa would be a pretty good option. It is also simple and you can start straight away - no need to wait another 9months!!
    • kidmugsy
    • By kidmugsy 5th Jan 14, 4:35 PM
    • 8,059 Posts
    • 5,168 Thanks
    kidmugsy
    • #5
    • 5th Jan 14, 4:35 PM
    • #5
    • 5th Jan 14, 4:35 PM
    May I suggest that you check the charges on the Pru funds offered for the AVCs? If they are high by current standards, e.g. 0.65% p.a., then that would be a reason to tend towards S&S ISAs instead. There you could use ETFs or other "funds" with lower charges: Vanguard, for instance. The blogger 'Monevator' is a good source on such topics.
    • jem16
    • By jem16 5th Jan 14, 4:42 PM
    • 18,308 Posts
    • 10,921 Thanks
    jem16
    • #6
    • 5th Jan 14, 4:42 PM
    • #6
    • 5th Jan 14, 4:42 PM
    Thanks. I forgot we posted this last year...how time flies. My wife's circumstances have NOT changed since this post and embarrassed to say that due to fear (of doing the wrong thing) she has done nothing. Hoping that some help from the forum may help her make her mind and move to action.

    Jabba
    Originally posted by jabbahut40
    There is nothing much that can be added over what was already posted in the other thread.

    The main advantage to AVCs with the LGPS is the ability to take the whole AVC pot as the tax-free lump sum.

    I take it your wife has decided against ARCs?
    • jabbahut40
    • By jabbahut40 5th Jan 14, 7:12 PM
    • 216 Posts
    • 51 Thanks
    jabbahut40
    • #7
    • 5th Jan 14, 7:12 PM
    • #7
    • 5th Jan 14, 7:12 PM
    There is nothing much that can be added over what was already posted in the other thread.

    The main advantage to AVCs with the LGPS is the ability to take the whole AVC pot as the tax-free lump sum.

    I take it your wife has decided against ARCs?
    Originally posted by jem16
    No. ARCs are still also on her list.

    If I am reading the other thread rightly the main advantages are:

    ARC
    Guaranteed return linked to CPI but cannot take as lump sum?

    AVC
    Can take as tax free lump, limited choice of funds, my wife takes on risk of fund performance compared to ARC.

    S&S
    Gains tax free, access to money throughout, my wife takes on risk of fund performance (with arguably more scope to control this through greater choice of funds available)

    Does this sound about right?

    Jabba
    • planteria
    • By planteria 5th Jan 14, 7:37 PM
    • 4,564 Posts
    • 992 Thanks
    planteria
    • #8
    • 5th Jan 14, 7:37 PM
    • #8
    • 5th Jan 14, 7:37 PM
    i would ensure that she is contributing as much to her pension as necessary to get GCC to part with as much as they will, and then invest externally...either via a Pension or an ISA.
    • atush
    • By atush 6th Jan 14, 12:10 PM
    • 14,436 Posts
    • 8,545 Thanks
    atush
    • #9
    • 6th Jan 14, 12:10 PM
    • #9
    • 6th Jan 14, 12:10 PM
    Thanks. I forgot we posted this last year...how time flies. My wife's circumstances have NOT changed since this post and embarrassed to say that due to fear (of doing the wrong thing) she has done nothing. Hoping that some help from the forum may help her make her mind and move to action.

    Jabba
    Originally posted by jabbahut40
    How about you look up the funds you might have chosen and see how much they went up in 2013? That she didn't take part, and didn't reap the benefits might jog her into action lol?
    • woolly_wombat
    • By woolly_wombat 6th Jan 14, 4:48 PM
    • 317 Posts
    • 196 Thanks
    woolly_wombat
    No. ARCs are still also on her list.

    If I am reading the other thread rightly the main advantages are:

    ARC
    Guaranteed return linked to CPI but cannot take as lump sum?

    AVC
    Can take as tax free lump, limited choice of funds, my wife takes on risk of fund performance compared to ARC.

    S&S
    Gains tax free, access to money throughout, my wife takes on risk of fund performance (with arguably more scope to control this through greater choice of funds available)

    Does this sound about right?

    Jabba
    Originally posted by jabbahut40
    FWIW I went for the certainty of ARCs, which looked like good value, with the employer taking the risk. At that time ARCs were RPI-linked, but that is not the case with ARCs taken out now (and the cost of RPI-linked ARCs rose sharply and at very short notice in April 2013).

    I am now considering investing separately in a SIPP as well, due partly to the uncertainty over the continuing ability to take all LGPS AVC investments as lump sum, but more importantly because with LGPS 2014 starting soon I do not envisage continuing in current employment until State Pension Age.

    WW
    Last edited by woolly_wombat; 06-01-2014 at 5:10 PM.
    • jem16
    • By jem16 6th Jan 14, 7:32 PM
    • 18,308 Posts
    • 10,921 Thanks
    jem16
    I am now considering investing separately in a SIPP as well, due partly to the uncertainty over the continuing ability to take all LGPS AVC investments as lump sum, but more importantly because with LGPS 2014 starting soon I do not envisage continuing in current employment until State Pension Age.

    WW
    Originally posted by woolly_wombat
    Are you a higher rate taxpayer?

    if not you might be better using a S&S ISA. That way you could retire earlier and use the S&S ISA to bridge the gap till NRA for the LGPS - would save any actuarial reduction.
    • jabbahut40
    • By jabbahut40 6th Jan 14, 8:09 PM
    • 216 Posts
    • 51 Thanks
    jabbahut40
    How about you look up the funds you might have chosen and see how much they went up in 2013? That she didn't take part, and didn't reap the benefits might jog her into action lol?
    Originally posted by atush
    Love it! Think this will do the trick. Thanks
    • vm2pensioner
    • By vm2pensioner 7th Jan 14, 9:38 AM
    • 102 Posts
    • 42 Thanks
    vm2pensioner
    One thing to keep in mind with using LGPS Prudential AVCs to take as lump sum is that, if the AVC has run for less than five years, there is an exit charge of (I think) 15%.
    • kidmugsy
    • By kidmugsy 7th Jan 14, 3:24 PM
    • 8,059 Posts
    • 5,168 Thanks
    kidmugsy
    One thing to keep in mind with using LGPS Prudential AVCs to take as lump sum is that, if the AVC has run for less than five years, there is an exit charge of (I think) 15%.
    Originally posted by vm2pensioner
    Well said, sir. That would be enough to put me off AVCs: you're trapped and they can change terms on you. In a personal pension of some sort you can move to another provider.
    • woolly_wombat
    • By woolly_wombat 7th Jan 14, 4:09 PM
    • 317 Posts
    • 196 Thanks
    woolly_wombat
    Are you a higher rate taxpayer?
    Originally posted by jem16
    No, I'm not.

    if not you might be better using a S&S ISA. That way you could retire earlier and use the S&S ISA to bridge the gap till NRA for the LGPS - would save any actuarial reduction.
    I'm already contributing to a S&S ISA as well.

    WW
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