We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

advice on pension needed please

Im 31 years old and have been teahcing for 3 full years, so i only started paying into a pension when i was 28. I dont want to be working when im 60 so i am going to start topping up my pension now. My question is what is the best course of action.

The prudential do AVC where you get tax relief on the money you put in or..
I can buy back blocks of pension from the Department of education. It costs £1950 to buy back £250 worth of pension. This can be done over 20 years costing about £13 per month for each block.
Or should i do something else?

I can afford about £50 a month.

Any advice would be great!

f

Comments

  • dunstonh
    dunstonh Posts: 118,549 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    The prudential do AVC where you get tax relief on the money you put in or..

    Rubbish option unless it can be used to enhance your tax free lump sum. Plus it has to match the retirement age of the scheme. Not ideal for early retirement.
    I can buy back blocks of pension from the Department of education. It costs £1950 to buy back £250 worth of pension. This can be done over 20 years costing about £13 per month for each block.

    Good option (unless you are not a member and are a taxpayer ;) ). The only downside is that benefits match the scheme retirement age. It isnt suitable for early retirment planning.

    If you are looking for fund for earlier retirement then £50pm isnt going to be enough. You should also not use anything linked to the occ scheme.

    You are going to have to live on the lump sum you have built up until the pension kicks in. So, that means having a large enough lump sum to do that. So, lets assume you want to finish at 55. That means you have 24 years to build up enough money to fund the gap between 55 and 60.

    £50pm for 24 years @7% p.a. return = £36,471. Thats not going to go far. You really need to be looking closer to £200pm to make it a possible reality. Probably closer to £300 to make it really viable.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • fredy34
    fredy34 Posts: 245 Forumite
    thanks for the quick response.

    The AVC allow you to take a tax free lump sum up to 25% of the fund value and it is accessible from when im 55. does that make a difference?

    Is the buy back of pension my best bet? regardless of early retirement problems?

    what else can i do with the money? I realise its low but its all ive got and i feel i need to start doing something.
  • dunstonh
    dunstonh Posts: 118,549 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    The AVC allow you to take a tax free lump sum up to 25% of the fund value and it is accessible from when im 55. does that make a difference?

    Are you on about the AVC or the FSAVC? FSAVCs can be taken earlier but AVCs match the occ scheme. Either way the Pru pensions are poor quality.
    Is the buy back of pension my best bet? regardless of early retirement problems?
    The TAPS scheme is very good value for teachers. As a taxpayer and having no access to that scheme, I think it is too good value !
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • fredy34
    fredy34 Posts: 245 Forumite
    its the AVCs i was talking about but i may have got mised up. thanks for advice. Why is pension information so confusing!

    vbmenu_register("postmenu_6150483", true);
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 348.2K Banking & Borrowing
  • 252.1K Reduce Debt & Boost Income
  • 452.4K Spending & Discounts
  • 240.8K Work, Benefits & Business
  • 617K Mortgages, Homes & Bills
  • 175.6K Life & Family
  • 254K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 15.1K Coronavirus Support Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.