AVC Investment Options advice

beanie414

Hi,

I am looking for some advice I am looking to do AVC's as I have a FS salary scheme. I am 44 years old I can contribute 10% extra into my pension from my salary every 4 weeks using AVC's. What I need is some advice on what investment options that I have a choice from I should choose since I don't know much about these sort of things.

I do earn just enough to be in the 40% tax bracket.

Here's a list of the places i can put my AVC's by self selection funds and i have an option saying how much % in each one I would like.

Standard Life - Deposit and Treasury Fund
Standard Life - Annuity Purchase Fund
Standard Life - Managed Pension Fund
Standard Life - Ethical Pension Fund
Standard Life - International Pension Fund
Standard Life - Vanguard FTSE UK All Share Index Pension Fund
Standard Life - BlackRock Aquila Connect Over 5 Year Index-Linked Gilt Fund
Standard Life - BlackRock Aquila Connect World (Ex-UK) Equity Fund
HSBC Amanah Fund


Alternatively I can choose an Active Lifestyle option that wants a selected retirement age for the investment (between 50 and 75)

I am planning on retiring about 55-60 years old hopefully!

Any input will be greatly welcomed thank you.

Good_bad_and_ugly

Beanie,

If you earn "just enough" to be a 40% tax rate payer (let's say £400 over), you'll only get 40% tax relief on contributions (£400 worth) that you make each year which creep into the upper bracket. Anything else, it's just 20% I'm afraid.

Does it have to be an AVC? Could it be a personal pension which might be cheaper and offer you more options? In fact, does it have to be a pension? Would investing into a partner's pension be more suitable?

If you already have a Final Salary pension, and if your (possible) partner has none, why not utilise some of their personal annual allowance instead of possibly adding to your own liability once you're retired?

Life-styling can be fine, it automatically de-risks you the closer you get to retirement, but as a pension is no longer an income only vehicle, is that what you want or need? Advising you on specific funds on this messageboard is going to prove impossible I fear.

If you have a ten year investment window, you don't have a huge window of opportunity to make good any dramatic investment losses mind. Work out how much you want then work back from that, how hard your funds are going to have to work.

If low risk funds are the funds you might instinctively gravitate towards, and if they realistically aren't going to return the numbers you're hoping for then you'll either have to be outside your comfort zone (that's your call!), invest more, work longer or settle for less.

peterg1965

Those investment choices look remarkably similar to the ones available to me in my new Company DC scheme which is run by Standard Life. OP do you also have the option to maximise your contribution into the scheme with normal pension contributions as opposed to AVCs?

kidmugsy

beanie414 wrote: »

Hi,

I am looking for some advice I am looking to do AVC's as I have a FS salary scheme.

Can you make these contributions by salary sacrifice?

beanie414

Hi and thank you for your replies.

I earn about £48,500 gross and I have about £400,000 in my pension at the moment. It estimates that I would have about £22,000 a year if I retired in 2025. We do have salary sacrifice at my work. It is Standard Life.

I don't know if I can put it into a pension rather than my AVC, they did not give me much information on the phone as they are not allowed to give investment advice. It's all very confusing to us as we are not really sure which option to take!

My wife does not have a pension and doesn't work but she has about 9 years of contributions. She was thinking about getting a Cavendish pension after reading about it on here. My wife is five years younger than I am.

We were hoping to have savings that would last us from 2025 until 2030 when I take the pension at 60.

greenglide

If your employer operates a salary sacrifice scheme does this also extend to AVCs?

If it does and it covers the sort of payments you want to make (mine covers regular payments with option to change only twice a year but lump payments are not salary sacrifice) then this is valuable if your salary ubject to NI is already below £42,000 - the upper earnings limit. This will save 12% on your contributions.

Good_bad_and_ugly

Beanie,

Bear in mind your wife can take over £10k now each year, without paying tax, it might be worth topping hers by £2880 net per annum. Consider allowing her to use up her allowance before you add to your tax burden.

beanie414

greenglide wrote: »

If your employer operates a salary sacrifice scheme does this also extend to AVCs?

If it does and it covers the sort of payments you want to make (mine covers regular payments with option to change only twice a year but lump payments are not salary sacrifice) then this is valuable if your salary ubject to NI is already below £42,000 - the upper earnings limit. This will save 12% on your contributions.

I'm a bit confused as I don't really understand what you mean.:o I will call up the pensions department and ask them if I can just do salary sacrifice to top up my pension instead of opening an AVC?

Edited to add - I have got to do it through an AVC.

Good_bad_and_ugly wrote: »

Beanie,

Bear in mind your wife can take over £10k now each year, without paying tax, it might be worth topping hers by £2880 net per annum. Consider allowing her to use up her allowance before you add to your tax burden.

Yes, she was saying that she can put £240 a month into a pension and the government adds £60 or something like that. Can she do anything else with her £10,000 allowance?

Good_bad_and_ugly

The annual allowance (for anyone born after 5 April 1948) is now £10,600. That means, you can earn £10,600 each year (from a pension for instance) before paying tax. If you had that money all in your pension however, and started taking it, it would be added to your existing income, and you'd be paying 20%+ income tax on it.

Other points to bear in mind, your relative ages, any likely inheritances or future lump sums coming your way, diversification (you have well in excess of an ideal amount with one provider, in itself, not the end of the world) and fund charges - will you be getting a hefty rebate to offset much of the costs if you save in your name?

That's just a thought mind, without knowing all the detail, it's impossible to say. It would certainly be a useful place to start though.

beanie414

Good_bad_and_ugly wrote: »

The annual allowance (for anyone born after 5 April 1948) is now £10,600. That means, you can earn £10,600 each year (from a pension for instance) before paying tax. If you had that money all in your pension however, and started taking it, it would be added to your existing income, and you'd be paying 20%+ income tax on it.

Other points to bear in mind, your relative ages, any likely inheritances or future lump sums coming your way, diversification (you have well in excess of an ideal amount with one provider, in itself, not the end of the world) and fund charges - will you be getting a hefty rebate to offset much of the costs if you save in your name?

Thanks.:) I was reading about the allowance and I understand that now. So it is a bit of a no brainer that my wife should be sorting out her pension as she doesn't pay tax.

I might be getting an inheritance one day but it depends on care costs for my father. I'm not sure what you mean by rebate.:o

Once my wife puts the £2,880 into her pension, would it be better for me to get a personal pension for myself or put the rest of the money over £42,000 into an ISA rather than an AVC with my work?

OldBeanz

You should be trying to put anything in the 40% tax rate into your pension/AVC through salary sacrifice. The plan is to stop allowing pensions being claimed more than 10 years before SP age so you need to put some money into ISA's if you want to retire at 55.
Remember that your wife can also claim 25% of her drawdown tax free as well so that she can withdraw £14,133 ((£10600 /3)*4) without bothering the tax man.