Paying AVCs?

evergreen

I am about to go partially retired with the civil service, so I will be taking my pension and reducing my hours at work. Although my gross income will be less, because of not paying NI on pension bit, my net income will increase about £100 per month. I am 59.5 years old and pay 20% tax. I have a civil service AVC that I haven't paid into for several years with a management fee of 0.5 %. Is it worth paying the additional £100 into this AVC for a couple of years, or it better to save it. The AVC fund is currently only £15000. Thanks

evergreen

Would really appreciate some advice. Thanks

hugheskevi

Assuming you are a basic rate taxpayer, you wouldn't be getting much out of the voluntary pension contributions - just the tax saving from the lump sum (also assuming you will be a basic rate taxpayer in retirement).

If you want extra income in retirement and have no need of capital now, or you won't pay tax in some future years, pension contributions might still be worthwhile though.

Buying Added Pension may well work out better value than Defined Contribution AVCs, you should check that.

Alternatively, you could put the money in a completely different pension, and when it gets close to £2,000 take it all as a lump sum (25% tax free, 75% taxable). You can do that twice, and enjoy both capital and tax relief