Quick Question (I hope) - potentially daft.

Qubit

Please excuse me if this is a stupid question. I am shortly due to leave my job. I have been contributing to a pension for a while, but not that long.

I have the option to purchase an AVC up to 15% of my salary. My question is, is it worth my while to do so?

Many thanks for any help

jem16

You haven't provided enough information for anyone to comment.

What kind of pension - Defined Benefit ( ie final salary or career average) or Defined Contribution?

If it's Defined Benefit, what is the AVC going into? Is it also Defined Benefit or is it Defined Contribution?

Are you a higher rate taxpayer?

Linton

You are asking two separate questions - Should you be putting more money into your pension? Is an AVC the best vehicle to do it?

Further information will help answer the first question, as well as providing us with more data they may help you think through your retirement plans/needs.

1) How old are you?
2) What pension provision have you accumulated so far, either in terms of a DC lump sum or a DB guaranteed income? How does it compare with your expected needs in retirement? Is extra pension required to meet those needs?
3) What other savings/investments do you have? In particular do you have an emergency cash fund to cover unforeseen expenses?
4) Can you afford the 15% in the light of future known expenses?

Qubit

jem16 wrote: »

You haven't provided enough information for anyone to comment.

What kind of pension - Defined Benefit ( ie final salary or career average) or Defined Contribution?

If it's Defined Benefit, what is the AVC going into? Is it also Defined Benefit or is it Defined Contribution?

Are you a higher rate taxpayer?

Apologies

Career Revalued Benefit (defined benefit).

I think its a choice of funds with the Pru, based on risk profile - I would probably spread it across some of the medium risk ones like the prudential index linked fund.

Im not a higher rate tax payer.

Qubit

Linton wrote: »

You are asking two separate questions - Should you be putting more money into your pension? Is an AVC the best vehicle to do it?


1) How old are you?
2) What pension provision have you accumulated so far, either in terms of a DC lump sum or a DB guaranteed income? How does it compare with your expected needs in retirement? Is extra pension required to meet those needs?
3) What other savings/investments do you have? In particular do you have an emergency cash fund to cover unforeseen expenses?
4) Can you afford the 15% in the light of future known expenses?

39.

For various reasons - mainly affordability -not very much! Been paying in for just 3 years. I am all too aware that what little provision i have thus far is not enough.

I do have enough emergency cash for about a year. I am being made redundant.

Yes, i should be OK affordability wise. Clearly I need to look into my options further. I guess I was just wondering if it was likely to be worth taking advantage of what was on offer whilst its still available to me.

Linton

Qubit wrote: »

39.

For various reasons - mainly affordability -not very much! Been paying in for just 3 years. I am all too aware that what little provision i have thus far is not enough.

I do have enough emergency cash for about a year. I am being made redundant.

Yes, i should be OK affordability wise. Clearly I need to look into my options further. I guess I was just wondering if it was likely to be worth taking advantage of what was on offer whilst its still available to me.

OK so it look like a pension payment could well be sensible.

I assume that you will pay the full price for the 15% - ie no employer contribution...

I dont think you should look on this as a special one-off offer. You and your employer can put up to 100% of your income (or £40K, which ever is the lower) into pensions. In your case it could be the employer provided AVC, though the rules of the AVC may have other limitations, or it could be a private pension.

Which is best is a matter of the details. A private pension will be far more flexible as regards to both investments and what you can do with it once you are 55. On the other hand your employers pension may give you the option of providing the cash for the DB pension tax free lump sum, so you get the lump sum without decreasing your DB pension. This can be a very good deal.

I think to make the decision you need to get full details of the options/limitations/costs of the AVC.