Company Scheme and/or AVC ?

Dick_here

I'm currently paying into both. Should I continue (the AVC is £30pm) or should I throw that directly into the company scheme ? Are there any advantages to having the AVC aswell, it is going into the Standard Life 'Lifestyle' Fund ?

dunstonh

should I throw that directly into the company scheme ?

Is the buying of extra years an option for you?

Are there any advantages to having the AVC aswell

Can it be used in conjunction with the main scheme to enhance lump sum benefits?

AVCs are largely obsolete nowadays (post 6th April 2006). Schemes no longer have to offer AVCs and with FSAVCs converted to personal pensions and charges much lower on individual pensions nowadays there is often no reason to consider the AVC as a valid option. Especially where the scheme hasnt updated the rules and still working to old rules (which they are allowed to do).

Its only when enhanced contributions (i.e. employer pays as well) or the lump sum benefits can be improved by use of the AVC that they really still look attractive.

Dick_here

dunstonh wrote: »

Is the buying of extra years an option for you?

Well, I would be switching from contributing at 1/65ths to 1/60ths. Is that significantly better ?

Can it be used in conjunction with the main scheme to enhance lump sum benefits?

A lump sum is available from it, yes. The employer doesn't contribute though, but wouldn't if I increased my company scheme contributions either.

Is it simply a matter of whether to trust the company scheme or Standard Life to produce better returns ? If so, wouldn't SL be better ?

dunstonh

Well, I would be switching from contributing at 1/65ths to 1/60ths. Is that significantly better ?

Without figures to compare its hard to say but my gut feeling would be that going to 1/60th would be better than the AVC.

Is it simply a matter of whether to trust the company scheme or Standard Life to produce better returns ? If so, wouldn't SL be better ?

The company scheme has no returns if you increase your contributions into that. You just have the risk of scheme funding to meet its liabilities. The pension from that will also typically have spouse benefits and indexation. The AVC would buy an annuity and is subject to investment returns.

The scheme income you can more or less work out what you are going to get in todays terms whilst the AVC is subject to investment returns and annuity rates. You could get more, you could get less.

Do a calculation making assumed growth at 5% p.a. on the standard life. Then assume an income of 4% from that lump sum. Then compare that to moving the main scheme to 1/60ths and see what the difference is. The figures will be rough but it will give you an idea if the two options are close or one is miles ahead of the other.

Dick_here

Many thanks as always, bigD