Avc's

garrob

Hello folks,
I was reading a few posts on here about avc's and it got me thinking if I am doing the right thing. The company I work for stopped our DB pension on March 2016. I have been paying into the DC scheme since 2016 and paying £150 per month in avc's. I was wondering if it is beneficial to keep paying them or is there something better for my £150? I only did it because a few guys in work are doing it but I never did any research. Any advice would be great.

Clive_Woody

Depends how the AVC scheme works.

I pay AVCs at work via salary sacrifice (pre-tax/NI) and my employer also adds an extra 13% (equivalent to their savings from the SS) so for every £100 or so I lose from take home I think I get around £200 (ish) into my DC pot.

Check the rules of your scheme

Marcon

What are you trying to achieve? Flexibility in terms of access, bigger tax free lump sum, maximise tax savings, etc?

garrob

To be honest with you, I don't know. I just started saving the money to give me a bigger pension pot.
I don't think my company contribute to my avc's but I will ask them.
As I said, the idea behind it was to have a bigger pension without me knowing the other options I could have. As I plan to retire in 2.5 years maybe it's not worth putting the money into something else. Thank you for the replies so far.

cloud_dog

garrob wrote: »

To be honest with you, I don't know. I just started saving the money to give me a bigger pension pot.
I don't think my company contribute to my avc's but I will ask them.
As I said, the idea behind it was to have a bigger pension without me knowing the other options I could have. As I plan to retire in 2.5 years maybe it's not worth putting the money into something else. Thank you for the replies so far.

You use the term 'AVC' which does have a specific pension contribution connotation but, do you mean you are making additional contributions in to an AVC scheme linked to your original DB scheme, or do you mean you are making additional contributions possibly in to the DC scheme?

Sometimes AVCs linked to a DB scheme can be inflexible in accessing them, i.e. they can be tied in to providing possible additional benefits in the main (DB) scheme and only when you take the main DB, alternatively (even within the context of AVC linked to a DB scheme) they can simply be another pot of money (this is my situation).

If they are linked to the original DB scheme and provide 'benefits' it may be difficult to take those outside of taking benefits from the original DB scheme rules / NRA.

If they are AVCs and they do not provide additional benefits in the original DB scheme then it is possible for you to transfer them (at some point) and access outside of any constraints by the original DB scheme.

I have a fairly decent DB scheme but I came to the conclusion that I didn't have flexibility in retirement age, so that is what I am now focussed on. I am currently utilising my schemes AVCs (within SS) to build a pot of money so as to facilitate earlier retirement. My plan will be to undertake a transfer of the AVCs in to a SIPP (probably) when I leave the company (i.e. retire early) and then draw on that pot until my DB scheme kicks in.