Should I start AVCs?

Scientist_of_Sound

I've been paying into a Final Salary LGPS for 6 years as a lecturer at a University.

My wife is looking to start a personal pension so I was considering whether putting the equivalent of what she would put into a personal pension into AVCs would be a good idea.

Any opinions?

Many thanks

Pixieboy

Not an answer I'm afraid but a question... as a lecturer are you not in the Teachers' Pension Scheme?

chesky369

Can you buy extra years with this AVC plan? If yes, then probably it would be a good idea but if it's a separate money-purchase scheme then you'd probably be best making alternative arrangements through a personal pension of some kind, or ISAs, etc. AVCs are pretty much on the way out and only worth doing if there is a major benefit like extra years.

jem16

Scientist_of_Sound wrote: »

I've been paying into a Final Salary LGPS for 6 years as a lecturer at a University.

My wife is looking to start a personal pension so I was considering whether putting the equivalent of what she would put into a personal pension into AVCs would be a good idea.

Any opinions?

Many thanks

The only problem with that is that the pension provision would be all in your name and would make you liable to more tax. When you are over 65 you will each have around £10k in personal allowances so it makes sense to utilise these allowances for both of you.

There is also the problem of what would happen to your wife after you die. At least there is a spouse benefit but would it be enough?

Scientist_of_Sound

Many thanks for your comments chaps. You've made me consider things I hadn't before.

I am paying into a teachers pension, which comes out of my pay every month and increases as my income increases.

Apparently I can't buy extra years but I can buy £250 of additional pension or multiples thereof up to a maximum of £5,000. This would be through Additional Regular Contributions or ARCs.

Does this sound much better?

jem16

Scientist_of_Sound wrote: »

Many thanks for your comments chaps. You've made me consider things I hadn't before.

I am paying into a teachers pension, which comes out of my pay every month and increases as my income increases.

As do I.

Apparently I can't buy extra years but I can buy £250 of additional pension or multiples thereof up to a maximum of £5,000. This would be through Additional Regular Contributions or ARCs.

Whether it's good value or not depends on your age. The previous system of buying added years was better.

Does this sound much better?

For your wife's pension plans, no it's not any better. It's not really any better for you either.

Once you get to £21k of taxable income ( included state pension) you will start to lose the higher personal allowance until by around £26k you have lost all of it and are back to the lower personal allowance. So you will be paying much more tax.

You will be much better paying that money into a pension for your wife so she can utilise her own tax-free allowances.

chesky369

I just re-read your original posting and realised I'd misinterpreted what you'd said - I misunderstood the fact you were intending to invest your wife's contributions into AVCs instead of her own pension. I'd thought you meant putting an equivalent amount into AVCs as well as her own pension.

I didn't think much of the idea as I originally interpreted it - so definitely not now. As a point of principle, women anyway should always ensure they've made sufficient provision for their own retirement - for too long we relied on husbands to do this, only for it to all come unstuck years down the line.

dunstonh

Retirement planning should be split as equally as possible. Partly for death reasons and partly for tax reasons. For example, £20k in one name sees 10k of that taxed. Whereas 10k each name sees no tax.

You should try to avoid being top heavy in one name.

Scientist_of_Sound

This is all great stuff guys. I'm so glad my first posting here has received such helpful responses.

We're both 28 so we have a few years to go (fingers crossed) before we retire.

My initial thought was that having one huge pot must be better than having more smaller ones but with personal allowances etc. its obviously better not to put all our eggs in one basket.

I think I'll book an appointment with local IFA.

jem16

Scientist_of_Sound wrote: »

This is all great stuff guys.

Many thanks for your comments chaps.

Perhaps you could start by not assuming it's only men who have some useful comments to make?

baby_boomer

Scientist_of_Sound wrote: »

My initial thought was that having one huge pot must be better than having more smaller ones

In an age where most partnerships split up, it can't be a good idea, or fair, to have all the pension pot with one partner.