Extra into company scheme or AVC ?

Dick_here

Is it better to contribute as much as possible into the company (career average) scheme or put some into an AVC (with Standard Life but also through the company). Bearing in mind I expect to be redundant long before 65, is putting some in the AVC the better option ?

dunstonh

Depends on what you are trying to achieve.

AVCs are largely obsolete now. Unless there is some employer incentive to use an AVC (matched contributions for example) or the AVC can enhance the lump sum benefit on the main scheme then there is really little reason to tie yourself to an AVC.

Added years is often the best option but with career average earnings being used, that may not be ideal if the average is likely to be weighted towards the lower end of your earnings. It also depends on whether the average is index linked or not.

If that option isnt really ideal then stakeholder, personal pension or SIPP come into play.

*Denise*_2

That's very interesting, I've been paying AVCs into my company scheme alongside my final salary scheme (but on a money purchase basis) for years now. I always thought that the charges on such a scheme would be less than if I had a separate personal pension for the AVCs - but it sounds like that is not the case.

dunstonh

I always thought that the charges on such a scheme would be less than if I had a separate personal pension for the AVCs - but it sounds like that is not the case.

Times change. That used to be the case but from around 2001 it stopped being the case. Stakeholder pensions, whilst a failure at increasing retirement provision, did succeed in bringing charges down on personal pensions. The other change is access to investments. The days of offering one or two (or small handful) of funds on a contract have also gone. Only the poor examples still do this or many in-house AVC schemes.