Are AVC's Any Good? I want to put £100 per month in

jem16

OMAR wrote: »

what if I take the avc fund at 55 and company pension at 65....or do you have to take both at the same time?

They are often tied together especially if you want to use the AVC pot to fund the tax-free cash. You cannot take the tax-free cash without taking the pension.

jem16

OMAR wrote: »

normal retirement is 65

Then you may well be looking at an actuarial reduction of 50% of your pension. You will need to check on this.

OMAR

50% wow! ok will check.....thanks for the info..any other tips or advice...as you seem to know what you're talking about!

jem16

OMAR wrote: »

50% wow! ok will check.....thanks for the info..any other tips or advice...as you seem to know what you're talking about!

Check the scheme rules to see;

1. If you are allowed early retirement or is it at the company's discretion.
2. Find out exactly what the actuarial reduction would be if you did leave at 55.

Then decide how you are going to bridge the gap between age 55 and 65. You can choose not to take the pension early and become a deferred member till age 65. However if you do that can you live off other savings/investments during those 10 years? If you feel that you could then start funding that with possibly a S&S ISA.

OMAR

Hmm, so if its 10 years....wudnt the value of the pension at 65 be the same at 55? As I would have stopped paying in at 55?

jem16

OMAR wrote: »

Hmm, so if its 10 years....wudnt the value of the pension at 65 be the same at 55? As I would have stopped paying in at 55?

No. Defined Benefits have index-linking built in. Your pension will continue to grow although not quite in the same way.

kidmugsy

[QUOTE=OMAR;63582417_you_seem_to_know_what_you're_talking_about![/QUOTE]

Stick around and you'll find that many of us suspect that jem knows what she's talking about.

OMAR

lol thanks jem!

AlwaysLearnin

One other option that might be worth checking is whether you can transfer the AVC pot at 55. This could allow you to get 25% of the AVC pot tax free at 55, and put the rest in to drawdown. If you build other non pension savings too, you could then use these, plus the tax free lump sum, plus the drawdown income between 55 & 65, leaving the defined benefit pension intact (plus continued drawdown amounts past 65)

jem16

AlwaysLearnin wrote: »

One other option that might be worth checking is whether you can transfer the AVC pot at 55. This could allow you to get 25% of the AVC pot tax free at 55, and put the rest in to drawdown. If you build other non pension savings too, you could then use these, plus the tax free lump sum, plus the drawdown income between 55 & 65, leaving the defined benefit pension intact (plus continued drawdown amounts past 65)

If you plan to do this, then using a separate Personal Pension or SIPP would be better than AVCs.

The only real reason to use AVCs is where it can be used to take the whole tax-free lump sum from it.