AVCs or ISA - which is better?

saggittarius

I've been paying into a Standard Life AVC since rejoining the Local Government Pension Scheme two years ago. Given the current stock market situation, and especially the recent news about Standard Life Sterling Fund, I don't know whether it would be better to stop paying AVCs and put the money into a cash ISA instead. Any advice gratefully received.

jem16

Unless you are about to retire, this is the best time to be paying monthly contributions into funds. You are buying when prices are low.

Andy_L

AVCs are an obsolescent legacy product.
In "the olden days" they were the only way for somebody with an occupational pension to make extra pension savings. Now that restriction has been abolished somebody with an occupational pension can use a stakeholder, personal pension or SIPP.
The only remaining benefit is that some schemes (including, IIRC, the LGPS) allow you to use the AVC to fund the tax free lump sum rather than having to give up final salary pension at a punishing exchange rate (commutation of 12:1 in the LGPS). There's also a chance that the employer may have negotiated lower charges than avaliable to the general public.

Theres a sticky "ISA vs Pension" thread at the top of this forum that covers the pros & cons in detail.

dasherman

Some employers also pay extra money into your AVC. Mine does,and they have also negotiated an extra 6% contribution from the provider(Norwich Union/Aviva).

'Free money' is always worth taking! If it's not available then stakeholders,PP's or SIPP's are much more portable.

Dick_here

Andy_L wrote: »

AVCs are an obsolescent legacy product.
In "the olden days" they were the only way for somebody with an occupational pension to make extra pension savings. Now that restriction has been abolished somebody with an occupational pension can use a stakeholder, personal pension or SIPP.

I understand that there are now options other than an AVC, but if you are already paying into one is there a specific reason to stop and switch to something else ? I'm currently paying a small AVC through my company to Standard Life.

dunstonh

if you are already paying into one is there a specific reason to stop and switch to something else ?

Yes. If the alternative is better then you should switch to the alternative.

Dick_here

dunstonh wrote: »

Yes. If the alternative is better then you should switch to the alternative.

With you so far.

Now could you offer an alternative that is better and explain why please.

dunstonh

Are you near the age allowance reduction?
Is your spouse on track to utilise their tax free allowance and age allowance?
Is retirement provision balanced to or too much in one name?
Is capital provision adequate?
Would ISA prove to be more efficient?
Would personal pension (or varients) prove to be more useful with their different investment choice and not being linked to the main scheme allowing more flexible commencement ages?

Andy_L

!!!!!!_here wrote: »

With you so far.

Now could you offer an alternative that is better and explain why please.

Stakeholder pension, SIPP or personal pension:
Possibly lower charges
Wider fund selection
Doesn't have to be taken at the same age as the occupational pension
Can be in a spouses name to optimise income tax situation

Dick_here

Andy_L wrote: »

Stakeholder pension, SIPP or personal pension:
Possibly lower charges
Wider fund selection
Doesn't have to be taken at the same age as the occupational pension
Can be in a spouses name to optimise income tax situation

Thanks

Is there tax relief available on any of these ? If not, shouldn't I simply pay as much as possible into the occupational scheme ?

dunstonh

Its not a case of one being better than the other all the time but a case of one could be better than the other depending on your circumstances and needs. There are plenty of scenarios were you could highlight each one as being best.