Teacher pension v's AVC

Confused38

Hi,

I wonder if anyone can help me.... I would like to top up my pension but I don't know whether it is best to 'buy in' more pension or buy AVCs...Teacher pension people will not give advice, only answer questions and prudential AVC are obviously trying to sell their AVCs, so don't feel I am getting a balanced view.

I have two options at the moment, either put in a lump amount , around £5000 or pay £75 to £100 per month.

Really confused as to the best option so would be grateful for any advice.

Thanks

justme111

Why don't you get numbers from tp - how much benefit will that contribution get you. Then you will be able to compare it with AVC ( although if it is invested it is unknown , sorry not familiar with AVCs) assuming average returns from like last 100 years. Check when you will be able to draw that AVC as well and any other conditions.

Kynthia

There isn't one right answer but depends on your personal plans and situation. Questions that spring to mind are:

What does that money buy you with the teachers pension?
What is the normal retirement age of your teachers pension?
Are you hoping to retire before this and do you have plans to fund this?
Are you able to take your AVC before the teachers pension retirement age?
Does the teachers pension also buy you a widows pension and death in service lump sum or do you have the choice not to include them?
Do you have a partner you'd want to support in your absence?
Do you have any reason to think you won't have a long retirement as you may want the flexibility to spend your money at the rate you want then?
How much do you think you'll need for the retirement you want and are you on track for achieving that?

As you can see people would answer these questions differently yet they affect what choices you make. An IFA would give you personalised and regulated advice. Otherwise research in order to understand your options and make your own choices accordingly.

chucknorris

Confused38 wrote: »

Hi,

I wonder if anyone can help me.... I would like to top up my pension but I don't know whether it is best to 'buy in' more pension or buy AVCs...Teacher pension people will not give advice, only answer questions and prudential AVC are obviously trying to sell their AVCs, so don't feel I am getting a balanced view.

I have two options at the moment, either put in a lump amount , around £5000 or pay £75 to £100 per month.

Really confused as to the best option so would be grateful for any advice.

Thanks

I bought the max allowed at the time (a few years ago) of £5,600 additional pension, it cost me about £74k, which I paid for over 3 years. I don't think that there is much difference between a lump sum and regular payments, providing you don't exceed the annual allowance of £40k or 'relevant earnings' (which you are very unlikely to be for only £5k unless you are on a substantial salary and/or also investing in pension elsewhere).

I much preferred buying additional TPS pension to the prudential AVC because of the certainty, rather than relying on the performance of the fund. I have enough investments which are dependent upon performance. But the choice is very subjective and what is best for you, will be tailored by your thoughts alone.

atush

What is your scheme age? If 65-67 and you want to retire at say, 60- it is better to have the AvC. AS you can draw that (you may have to transfer it first) from age 55 or more and use that to live n while waiting for your TPS to pay out in full.

As your pension will be reduced for each year you take it early (around 5% I think) buying added pension then having it reduced is a poor use of your contributions.

zagubov

I'm not expecting to retire early as I have a mortgage to pay off. I bought three years additional pension and one and a half years worth of AVCs as I was 4.5 years short of retiring on a full pension.

It was a big mistake as I realised very late my AVC payments were double the amount of the teachers pension costs for only half the benefit (ie they were four times as much). I stopped the AVCs and now just pay more for the teachers pension, and wish I had done so from the start!

It's nobody's job to tell you how good the teacher's pension is, or sell you extra, so you never hear about it, but it is somebody's job to sell you AVCs.

xylophone

It's nobody's job to tell you how good the teacher's pension is,

It is the member's job to read the scheme booklet/web site and inform himself - it's his pension and his retirement.

zagubov

xylophone wrote: »

It is the member's job to read the scheme booklet/web site and inform himself - it's his pension and his retirement.

We did read that and that's why we mainly went for past added TP years. What we didn't figure out was how bad value the AVCs were in comparison.

We thought, for reasons that are lost in the mists of time, that we'd be better off with a mix of pension and AVCs and we'd have saved a fortune if somebody could have explained to us exactly how expensive AVCs would turn out to be.

So, tell you what, let me be the person to say it, OP Don't sign up to any AVCs without going away with a monthly figure for the outgoings that you can take away and mull over. Learn from our mistakes, it'll be cheaper than making your own.

atush

If the AVCs are bad value, you just use Sipps/PPs instead?

this is for those unlike Zagubov who want to retire early. For those working til scheme age (and dont have a reduced LE), buying added pension can make great sense.

i am astounded it is still possible to do so in an unfunded PS scheme.

chucknorris

atush wrote: »

If the AVCs are bad value, you just use Sipps/PPs instead?

this is for those unlike Zagubov who want to retire early. For those working til scheme age (and dont have a reduced LE), buying added pension can make great sense.

i am astounded it is still possible to do so in an unfunded PS scheme.

Not only is it still possible, but for those that bought the max amount allowed in the older pre 2015 older TPS scheme, they can also buy the max amount (again) when they join the newer post 2015 TPS scheme. It was nearly enough to keep me from retiring, to stay on for longer and buy another £6,500 of additional pension, but in the end I just wanted to retire, so I plan to this December.