AVC's or additional years?

Lois_L

Hi there,
I want to invest some extra money into my occupational pension but don't know whether to buy AVC's or additional years - any suggestions?

chesky369

additional years or do your own sipp or stakeholder - AVCs are probably a waste of space but find out first if there are real benefits like no charges.

LOST

you need to see what the projections for your pension is firstly, and if there is a shortfall from the desired - use an AVC to buy additional years if your pension is a defined benefit scheme (final salary scheme)

if your employer does offer an in-house AVC - go with them as they usually subside the costs for such arrangements

an alternative to an AVC used to be free-standing additional voluntary contribution (FSAVC's) but these are effectively personal pensions now - so you could set up an additional personal pension instead.

bunking_off

LOST wrote:

you need to see what the projections for your pension is firstly, and if there is a shortfall from the desired - use an AVC to buy additional years if your pension is a defined benefit scheme (final salary scheme)

The OP's scheme may be different to mine, but if it's the same you're mixing concepts with that statement.

I'm in a final salary scheme. If I wish to make extra contributions, my employer offers two options, namely

- pay into an AVC...which effectively acts as a defined contribution scheme hence outcome depends on performance of fund, or

- pay and buy extra years in the defined benefit scheme.

Which to choose all comes down to investment risk. Superficially the AVC route is more risky because you don't know what you'll get - but the returns may be higher. Set against this, there's another layer of riskiness - what happens if the defined benefit scheme folds, also for a good while the AVC choice was Equitable Life.

Think when I did the sums for our scheme I found the "extra years" option more attractive - but to be honest ultimately I found the "keep the money in my pocket & use it to pay my mortgage off more quickly" option the most attractive.

seven-day-weekend

I started paying AVCs but then used the fund to buy two extra years into my Local Government Pension final salary scheme.....works out much better for me.

My husband paid AVCs connected with the Teachers' Pension final salary scheme for a good few years. He gets the princely sum of £49 pcm from his £10,000 fund.

No contest as far as I am concerned.

Lois_L

thanks everyone - think I will go for the extra years option although I am not going to throw too much money at it as am also trying to clear the mortgage.

alberca

My husband currently pays AVC's to the PRU and has done since he started his Royal Mail Pension, can someone tell me if he is wasting his time paying these or should he transfer them to his Royal Mail Pension?

dunstonh

If the Pru AVC investments are suitable and decent then no problem. If the available investment range is poor quality then look for alternatives.

bloaty

I work for the NHS and am purchasing AVCs but we don't have the option to convert AVCs into additional years. We have to opt to purchase the extra years based on age 60 or 65, which isn't very favourable if you don't want to work to full retirement age.

Any suggestions?

Thanks

Bloaty

dunstonh

Personal pensions, ISAs, Stakeholder pensions, SIPPs have no link to the occ scheme so can be taken at a different age.

FSAVCs dont exist any more and subject to scheme rules being amended, AVCs dont need to be taken at the same time as the occ scheme either. AVCs are mostly obsolete now and only if the employer offers something to enhance the terms are they really much use (few exceptions exist but generally...)

alberca

alberca wrote:

My husband currently pays AVC's to the PRU and has done since he started his Royal Mail Pension, can someone tell me if he is wasting his time paying these or should he transfer them to his Royal Mail Pension?

Thanks for that