Change in AVC Rules

Trog

I'm 51 and I’ve been in my company final salary scheme for 18 years, it’s a 40/60ths scheme and I still “dream” of retiring at 55. I currently put 7% of my salary (60K) into the Final salary scheme; the company puts in currently nearly 17%. I also put another 10% of my salary into a AVC – I was going to use this to take as a 25% lump sum at retirement (the company allow this) and leave all my company final salary scheme money to pay me a monthly pension.

From the beginning of next month the company will not allow more than 25% of future AVC monies to be paid as a lump sum. My question is this worth carrying on with – or should I divert this money into an ISA or some other saving scheme.

Suggestions would be welcome.

Thanks

jem16

Trog wrote: »

From the beginning of next month the company will not allow more than 25% of future AVC monies to be paid as a lump sum. My question is this worth carrying on with – or should I divert this money into an ISA or some other saving scheme.

Much depends on how much income you think you will have in retirement. If you will pay basic rate tax in retirement and currently you receive 40% tax relief, then the pension is the best option although this may not necessarily be with an AVC.

However if you are getting 40% tax relief and paying 40% tax in retirement, you may be better considering S&S ISAs. This might also give you the flexibility of retiring at age 55 and leaving your final salary pension till normal retirement date so as not to have any actuarial reduction.

Trog

jem16 wrote: »

However if you are getting 40% tax relief and paying 40% tax in retirement, you may be better considering S&S ISAs. This might also give you the flexibility of retiring at age 55 and leaving your final salary pension till normal retirement date so as not to have any actuarial reduction.

"The 2011 review concluded changes were required and following consultation with the Company, greater reductions in early retirement pension will apply from 6 April 2013. The current reduction for early retirement is 4% for every year you retire before age 65, which equals 20% at age 60 and 40% at age 55. The revised factors will reduce accrued pension by 29% at age 60 and 48% at age 55."