Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • Charlotte456
    • By Charlotte456 1st Oct 17, 3:05 PM
    • 1Posts
    • 0Thanks
    Charlotte456
    Is it worth paying AVCs into work pension, I am 53?
    • #1
    • 1st Oct 17, 3:05 PM
    Is it worth paying AVCs into work pension, I am 53? 1st Oct 17 at 3:05 PM
    I already make 5% contribution to my company pension (DC Scheme) and my employer makes a 10% contribution. As I am a basic rate taxpayer, I am wondering whether it is worth making AVCs into the company pension at my age?

    Thanks for any advice.
Page 1
    • PeacefulWaters
    • By PeacefulWaters 1st Oct 17, 4:49 PM
    • 6,989 Posts
    • 8,600 Thanks
    PeacefulWaters
    • #2
    • 1st Oct 17, 4:49 PM
    • #2
    • 1st Oct 17, 4:49 PM
    The more you put in, the more you get out.
    • Thrugelmir
    • By Thrugelmir 1st Oct 17, 5:08 PM
    • 55,554 Posts
    • 48,918 Thanks
    Thrugelmir
    • #3
    • 1st Oct 17, 5:08 PM
    • #3
    • 1st Oct 17, 5:08 PM
    Will you reach your desired level of retirement income based on making contributions at the current level?

    In life. There's no such thing as a free lunch.
    "Wide diversification is only required when investors do not understand what they are doing." - Warren Buffett
    • Andy L
    • By Andy L 1st Oct 17, 5:09 PM
    • 8,471 Posts
    • 6,778 Thanks
    Andy L
    • #4
    • 1st Oct 17, 5:09 PM
    • #4
    • 1st Oct 17, 5:09 PM
    Unless the employer has negotiated a discount from the AVC provider then it is unlikely to offer any advantage, other than convenience, over an extra personal pension.

    As peaceful waters says the more you put in, the more you get out. The question is would the more you put in be best as more pension or or other investments such as an ISA. There are numerous threads on that question, the short answer is "a bit if both" but the precise mix is very sensitive to your circumstance.
    • tigerspill
    • By tigerspill 1st Oct 17, 6:07 PM
    • 243 Posts
    • 75 Thanks
    tigerspill
    • #5
    • 1st Oct 17, 6:07 PM
    • #5
    • 1st Oct 17, 6:07 PM
    If your employer offers salary sacrifice, then yes, it may be worth it as you will save NIC as well as tax.
    • Bravepants
    • By Bravepants 1st Oct 17, 6:10 PM
    • 268 Posts
    • 302 Thanks
    Bravepants
    • #6
    • 1st Oct 17, 6:10 PM
    • #6
    • 1st Oct 17, 6:10 PM
    I think the main concern about AVCs is how much tax you save, and what funds the AVC invests in. If you are a higher rate tax payer (40%+) AVCs make sense, however if you are a lower rate (20%) you may not benefit that much. See this for example, which demonstrates the tax equivalance between ISA and AVC for a 20% tax rate payer:

    http://monevator.com/pensions-versus-isas/

    However, if your AVC allows you to take a 25% tax free lump sum out of it, so effectively making your tax rate 15% in drawdown for the AVC, then it is probably worth doing for the 5% tax saving. Another "however" is that you could probably achieve the same 15% tax rate with a SIPP and choose the investment funds yourself.

    Another benefit of an AVC or SIPP is that once you have put the money in it is locked away until you are 55, so negates the ability (and temptation) to spend it before you need it!
    Last edited by Bravepants; 01-10-2017 at 6:16 PM.
    • Number75
    • By Number75 1st Oct 17, 10:03 PM
    • 176 Posts
    • 191 Thanks
    Number75
    • #7
    • 1st Oct 17, 10:03 PM
    • #7
    • 1st Oct 17, 10:03 PM
    In my company scheme, you cannot take your AVCs until you take your main pension.

    In my case, I wanted my AVC saving to fund years BEFORE I took my main pension. So a completely separate private personal pension was a better option.
    • greenglide
    • By greenglide 1st Oct 17, 11:00 PM
    • 2,863 Posts
    • 1,839 Thanks
    greenglide
    • #8
    • 1st Oct 17, 11:00 PM
    • #8
    • 1st Oct 17, 11:00 PM
    In my company scheme, you cannot take your AVCs until you take your main pension.
    This OP is talking about a DC scheme so these aren't "proper" AVCs.

    It is entirely possible that the contributions are invested in the same funds as the rest of the scheme. Since there is no DB scheme their isn't the same concept of "main pension".
    • tigerspill
    • By tigerspill 3rd Oct 17, 8:17 PM
    • 243 Posts
    • 75 Thanks
    tigerspill
    • #9
    • 3rd Oct 17, 8:17 PM
    • #9
    • 3rd Oct 17, 8:17 PM
    In my company scheme, you cannot take your AVCs until you take your main pension.

    In my case, I wanted my AVC saving to fund years BEFORE I took my main pension. So a completely separate private personal pension was a better option.
    Originally posted by Number75
    My company is the same (I am guessing we are in the same company). If so, the big benefit go linking the two is that the 25% TFLS is based on the FULL pension value and not just the DC part. This plays a huge part in my calculations as it means that all my AVCs will be paid tax free.
    • Number75
    • By Number75 3rd Oct 17, 10:14 PM
    • 176 Posts
    • 191 Thanks
    Number75
    Thanks for the correction greenglide! I re-read and OP did say DC - I got distracted by them also saying AVCs!
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

1,401Posts Today

6,892Users online

Martin's Twitter
  • RT @LordsEconCom: On Tuesday Martin Lewis, Hannah Morrish & Shakira Martin gave evidence to the Cttee. Read the full transcript here: https?

  • Ta ta for now. Half term's starting, so I'm exchanging my MoneySavingExpert hat for one that says Daddy in big letters. See you in a week.

  • RT @thismorning: Can @MartinSLewis' deals save YOU cash? ???? https://t.co/igbHCwzeiN

  • Follow Martin