S&S ISA or AVCs - best option

griffinsaver26

Im looking for a bit of advice about my best investment options. I’m 45, planning to have the mortgage paid off in 10 years with overpayments and have some savings put aside for an emergency pot. I’ve been paying into the LGPS since 2000 and now want to start some additional investments. My preferred initial choice was for a S&S ISA but then someone mentioned AVCs which are invested with Prudential. I’m a HR tax payer. 

AVCs - I would get the tax benefits with it being salary sacrifice. But I don’t know what the best investment option is with the Prudential funds available and i would only be able to access it when I retire, so a bit less flexibility. 

S&S ISA - I’ve done a lot of research so I know the funds I want to invest in. Flexibility if I wanted to withdraw before retirement. No tax benefits so would cost me more to invest. 

What do people think is the best option? Might it be worth splitting between the two? Or wait until mortgage is paid off and invest more heavily into AVCs then? Any advice on the Prudential options for AVCs? 

Just as I think I get some clarity of thought, another option comes along so I’m feeling a bit confused now. 

enthusiasticsaver

There are advantages to both.  Obviously the AVCs have tax advantages with the money going in but you are restricted as to when you can access it whereas the stocks and shares isa is tax free when you draw on it and you have more flexibility as to when you can withdraw it. 

Do you have a plan as to when you intend to retire and what is your pension forecasted to be?  Will you hit the LTA ?  My preference would be to do both and then reassess in 10 years time when your  mortgage is repaid.  Whilst I understand the desire to overpay the  mortgage and get rid of it, it may be financially advantageous to divert the overpayments into avcs or stocks and shares isas. 

Linton

LGPS  AVCs can be used to pay the lump sum on the main DB pension which could get you all the cash tax free without depleting your main pension.  And of course you get the higher rate tax relief which is very valuable unless your current pension contributions already bring you below the higher rate band. So I suggest you put at least sufficient into the AVCs to pay for the lump sum.
If you think the better fund options than available with LGPS justify it and you wont need the money until you are 55 you could pay pension payments into a SIPP.  This would get you the 40% tax relief but not the the DB pension tax free lump sum benefit.

AlanP_2

If the S&S ISA and the AVCs have the same objective / timescale then if you have researched ISA funds you can look at those on offer from Prudential and choose a similar risk / profile fund / funds to what would have been your ISA choices,

As a HR taxpayer ceratinly worth getting as much into a pension of some kind as you can as the relief is so generous.

Given your overall situation as I understand it I would:

1. Ensure OHs pension situation is on track to use their Personal Allowance once retired
2. Use AVC option to minimise / avoid HR tax payments
3. Trickle feed a S&S ISA alongside in case you want to retire very early
4. Chip away at the mortgage

This assumes you have an emergency cash pot already and that you are considering retiring at 60+ so that the hit to your LGPS pension isn't too heavy.

griffinsaver26

Thanks so much for the comments. Really need to check out OHs pension and see what we are able to do with that. The S&S isa I was interested in was a Vanguard Lifestrategy and I’m struggling to understand the Prudnetial options so need to do some more research I think.  Interesting that mortgage overpayment is bottom of the list!