Are emplyers obliged to accept AVC's?

Niv

I am currently putting in the max percentage of my salary offered by my employer but I wish to increase my pensions savings. Are they obliged to accept AVC's or would I have to look elsewhere? I assume i can have a SIPP in addition to my company pension?


Any advice welcomed.


Thanks,

dunstonh

In 2006, the rules requiring employers to offer an AVC were changed to make it optional. Since then, most employers have pulled their in-house AVC.

At the same time, most defined benefit schemes have closed and people moved to defined contribution schemes. So, there is no need for employers to offer AVCs with those as the main scheme can take them without the need for an AVC.

I assume i can have a SIPP in addition to my company pension?

You can have as many SIPPs, skakeholder pensions or PPPs as you like.

Niv

Ok thanks. So is there a general consensus on which is generally better if you want to up your pension contributions; AVC / contribute into your existing company pension or set up a completely separate pension?


I am not asking for which makes more money as obviously that is impossible to say but just a general feeling on in the real world what is better on balance. I guess I also mean, what is the advantage of setting up a private pension, I am not interesting in playing the markets etc so am happy to go with a managed pension that all I do is pump money in.

Kynthia

Niv wrote: »

Ok thanks. So is there a general consensus on which is generally better if you want to up your pension contributions; AVC / contribute into your existing company pension or set up a completely separate pension?


I am not asking for which makes more money as obviously that is impossible to say but just a general feeling on in the real world what is better on balance. I guess I also mean, what is the advantage of setting up a private pension, I am not interesting in playing the markets etc so am happy to go with a managed pension that all I do is pump money in.

A lot of that depends on what type of pension your employer offers. Is it defined contribution or defined benefit? If defined benefit what is the scheme retirement age, do you have to take the avc at the same time as the employer pension and can the avc be taken completely tax free if worth 25% or less of your whole employer's pension? Plus are you likely to retire before state pension age, your employers scheme retirement age and are you likely to pay 40% tax, 20% or possibly none. Without that info I doubt anyone can even have a feeling about what is best as any benefit of AVCs would change with those answers.

Brynsam

Niv wrote: »

Ok thanks. So is there a general consensus on which is generally better if you want to up your pension contributions; AVC / contribute into your existing company pension or set up a completely separate pension?


I am not asking for which makes more money as obviously that is impossible to say but just a general feeling on in the real world what is better on balance. I guess I also mean, what is the advantage of setting up a private pension, I am not interesting in playing the markets etc so am happy to go with a managed pension that all I do is pump money in.

Find out exactly what options you have via your employer's scheme. The previous post has given excellent pointers on what you need to consider.

If paying more into your employer's scheme isn't an option, then the advantage of a private pension is quite simply that you can pay more, subject to the usual HMRC limits. A stakeholder pension with low charges should do the trick. More info at https://www.pensionsadvisoryservice.org.uk/about-pensions/pensions-basics/contract-based-schemes/stakeholder-pension-schemes

cloud_dog

Niv wrote: »

Ok thanks. So is there a general consensus on which is generally better if you want to up your pension contributions; AVC / contribute into your existing company pension or set up a completely separate pension?

The term 'general' and pension rarely go together.

As an example, if your company offers salary sacrifice, then you can make additional savings on your contributions in to the company scheme / AVC scheme (2% NI savings for 40% tax payers). So, it really depends on the detail.

dunstonh

Ok thanks. So is there a general consensus on which is generally better if you want to up your pension contributions; AVC / contribute into your existing company pension or set up a completely separate pension?

There is no general consensus and it would be impossible for there to be one as it depends on what is available, how you buy it, how much involved, how you want to invest, what features/options you want etc.

If an AVC doesnt exist, you cant use an AVC. AVCs that do still exist tend to be old fashioned in terms of investment options. Charges no longer cheaper than the retail plans. However, a few gems still exist. Those that can linked to the main scheme for payment of the tax free cash or some where the employer will match contributions. However, if you have a DC scheme, its unlikely there will be an AVC.

If the employer allows contributions via the workplace scheme/occupational scheme, then that could be the simplest option. It may also be the cheapest but may not be. It may offer salary sacrifice.

Stakeholder pensions are niche nowadays. Mainly aimed at small contributions. Usually beaten on cost by personal pensions and some SIPPs but those may have higher contriubtion requirements or only kick in cheaper when you have £x or above in them.

Personal pensions are the main option in the advised retail market but barely exist in the DIY market.

SIPPs are the main option in the DIY market but are more complicated to operate than a workplace pension, personal pension or stakeholder pension. Charges can vary from very low to damned expensive.