Teachers Pension + AVC's/Private Pension

kpk2000

Currently a member of Teachers Pension Scheme and appreciate the benefits of the scheme even with recent changes. I will always stay a member of this.

My salary has recently increased though and my spare cash has increased to a point where I over a year I can save the full ISA limit (80% in cash & 20% in S&S) easily.

Thinking I should use tax relief where possible though (while it exists!) to boost my potential retirement funds and utilise AVC's to the TPS through Prudential or if possible have an additional DC pension. The thought of retiring early (60+) using the AVC's/DC Pension and then collecting the TPS at SPA appeals to me.

Does anyone have experience of using AVC's through Prudential or investing in a private DC pension as well as the TPS? Any thoughts or experiences would be useful? Especially interested if anyone has a separate DC pension alongside their TPS contributions. This is just me thinking at the moment.

zagubov

kpk2000 wrote: »

Currently a member of Teachers Pension Scheme and appreciate the benefits of the scheme even with recent changes. I will always stay a member of this.

My salary has recently increased though and my spare cash has increased to a point where I over a year I can save the full ISA limit (80% in cash & 20% in S&S) easily.

Thinking I should use tax relief where possible though (while it exists!) to boost my potential retirement funds and utilise AVC's to the TPS through Prudential or if possible have an additional DC pension. The thought of retiring early (60+) using the AVC's/DC Pension and then collecting the TPS at SPA appeals to me.

Does anyone have experience of using AVC's through Prudential or investing in a private DC pension as well as the TPS? Any thoughts or experiences would be useful? Especially interested if anyone has a separate DC pension alongside their TPS contributions. This is just me thinking at the moment.

Be careful and check what other options are available. Not totally sure that AVCs through the pru will be your best option. When I started this about twenty years ago, I thought they were. Ten years later, thought very differently.

Don't even consider leaving the TP of course. That'd be a special kind of stupid.

hugheskevi

Having a separate Defined Contribution pension alongside a public service pension may well be sensible. It is good for early retirement, tax efficiency in general and/or diversification of risk (as the Teachers Pension Scheme arguably carries greater political risk than a Defined Contribution arrangement, for example, the change in revaluation/indexation from RPI to CPI and so forth).

The first decision is whether additional saving should be in a pension or another investment vehicle (ISAs, etc). If you are a higher rate taxpayer a pension is attractive, if a basic rate taxpayer pensions will be much less attractive. Ensure that you are not at risk of breaching the Annual and Lifetime Allowances when considering additional pension saving - be aware that HMRC are likely to value your Teachers pension as being far more valuable than it actually is, so you can breach the Annual Allowance at much lower levels of salary than you would intuitively think.

If you think a pension is best, consider whether to use Defined Contribution pensions or one of the features of the Teachers Pension to save more - see this page. In particular, you may wish to consider AAB to lower your Normal Pension age. Which is best is a personal decision, based on various risk tolerances (investment, political risk, etc).

If you decide a Defined Contribution pension is best then there isn't too much difference between AVCs and a separate pension. Whichever you choose should be based on whether they offer the investments you want at a competitive charge. Check whether the AVC scheme has any restrictions, such as having to take the AVCs at the same time as the main pension, that a separate pension would not have. Have a look at sites such as Cavendish Online to get a broad idea of what is available at different levels of charge. If you don't have a preference and you are a higher rate taxpayer then using AVCs is likely to mean you don't have to reclaim higher rate tax relief from HMRC, but that should not be a meaningful part of the decision as it is straightforward to do.

bigadaj

A brief aside but saving cash in isas is pretty pointless currently. If you want to save in cash then use current accounts, if you have the timespan and can lock the money away then use stocks and shares isas.

LHW99

Worth checking if you can buy added years, rather than an AVC or extra DC?

jem16

LHW99 wrote: »

Worth checking if you can buy added years, rather than an AVC or extra DC?

Buying added years hasn't been possible since 2008. It was replaced by Additional Pension, not quite as good, but still a way of getting guaranteed pension.

This wouldn't be as useful for early retirement though.

PensionTech

DC AVCs are very good for maximising your tax-free cash on retirement without having to commute your DB pension at (usually) pretty poor commutation rates.

Without knowing more information, I'd be tempted to put it into DC AVCs... it sounds like you're doing pretty decently with cash savings.

hugheskevi

DC AVCs are very good for maximising your tax-free cash on retirement without having to commute your DB pension at (usually) pretty poor commutation rates.

Teacher's pension scheme doesn't permit commutation of AVC benefits instead of main scheme pension. AVC scheme and main scheme are treated as separate pots, so the AVC has no advantage over a personal pension in that regard.

atush

Any reason you are saving 80% of your isa allownce in cash? How much cash do you have in savings in total? More than 6 months worth?

I agree current accts pay better interest. And if the ISAs are for the long term, S&S isas would be a better bet.

jem16

PensionTech wrote: »

DC AVCs are very good for maximising your tax-free cash on retirement without having to commute your DB pension at (usually) pretty poor commutation rates.

You mentioned this before on another TPS thread. Did you not notice then that I had said this option isn't available in the TPS?

http://forums.moneysavingexpert.com/showpost.php?p=68879055&postcount=10

Without knowing more information, I'd be tempted to put it into DC AVCs... it sounds like you're doing pretty decently with cash savings.

I wouldn't as the AVCs with the likes of the Prudential are still a bit limited in how you can withdraw if you were planning to use it for funding the years between retiring early and NRA. They are allowing withdrawal of the full amount as opposed to having to have an annuity but weren't offering drawdown over the years, at least not at present.

I'd be tempted to use a PP/SIPP that offered more choice.

PensionTech

You mentioned this before on another TPS thread. Did you not notice then that I had said this option isn't available in the TPS?

Ah... no, no I didn't. Thought I'd read somewhere years ago that it was, so blithely went on. Many apologies!