AVC or SIPP

Zebra

Thanks for all the advice. Just a couple of further points.

Are there any benefits available to a personal plan that aren't available to an AVC?

For instance, I understand that a personal plan can be taken from aged 55, whereas an AVC can only be taken at the same time as the occupational pension ie. 60 at the earliest.

As early retirement is an option, I may consider doing both - AVC's for the tax benefit at 60 or 65, and a personal plan for 55 up to then, in conjunction with an ISA.

I suppose any tax-free amount taken as part of the personal plan at 55 will affect the amount able to be taken from the AVC at 60/65?

dunstonh

Are there any benefits available to a personal plan that aren't available to an AVC?

Much greater fund choice. Potentially lower charges. Ability to do unsecured pension option. Flexibility on commencement age.

I suppose any tax-free amount taken as part of the personal plan at 55 will affect the amount able to be taken from the AVC at 60/65?

No. Personal pensions are independent of the scheme. The only area where they are linked is the lifetime allowance (currently 1.8 million). Unless you are planning to have that sort of money in pensions or pension death benefits, then its not something to worry about.

Zebra

dunstonh wrote: »

Much greater fund choice. Potentially lower charges. Ability to do unsecured pension option. Flexibility on commencement age.

I considered the fund choice and charges in an earlier post, and thought that the increase in tax-relief available with an AVC more than made up for any poorer performance or higher charges - would you agree?

What do you mean by "unsecured pension option"?

dunstonh wrote: »

No. Personal pensions are independent of the scheme. The only area where they are linked is the lifetime allowance (currently 1.8 million). Unless you are planning to have that sort of money in pensions or pension death benefits, then its not something to worry about.

Thanks for that.

dunstonh

I considered the fund choice and charges in an earlier post, and thought that the increase in tax-relief available with an AVC more than made up for any poorer performance or higher charges - would you agree?

It depends on how much difference but in principle I would agree.

What do you mean by "unsecured pension option"?

That is not easily answered in a post as its a more complicated area and is currently undergoing change (for the better). I suggest a google on it to give you an idea (it used to be called income drawdown).

Zebra

dunstonh wrote: »

It depends on how much difference but in principle I would agree.

As with most things in life only hindsight will tell us that.

dunstonh wrote: »

That is not easily answered in a post as its a more complicated area and is currently undergoing change (for the better). I suggest a google on it to give you an idea (it used to be called income drawdown).

Thanks again - you've given me plenty to think about.

I've heard about Income Drawdown, but don't know the full details, so will do a bit more research.

I take it then that personal pensions allow it, but with AVC's I'd need to purchase an annuity with the amount I hadn't taken as a lump sum?

I'm keen on the idea of early retirement at 55, so I think a mix of personal pension, ISA/investments, pension scheme and AVC's would provide the most flexibility if not necessarily the highest income.

Back to the subject of tax-free sums - 25% of the total pension fund value can be taken tax-free, yes?
And I read somewhere that for a final salary scheme, the fund value is calculated as 25 times the yearly pension amount - is that correct?

jamesd

You won't need to purchase an annuity with the AVCs. Even if work only offered an annuity you could transfer them to a personal pension and use drawdown.