Which AVC provider?

ElephantBoy57

Looking online, at my local government pension, it lists contact information for The Prudential and Scottish Widows for the AVC.

So I am learning more about AVCs, its like a bank account for your AVC payments, that you access once you retire. Is the AVC money then invested in the stock market?

Can you choose any AVC provider that you wish? Which is the best one?

dunstonh

So I am learning more about AVCs, its like a bank account for your AVC payments, that you access once you retire. Is the AVC money then invested in the stock market?

No, its not like a bank account.   Your monthly contributions will be immediately invested in the investment funds of your choice (with AVCs, the choice will be limited).  It remains invested until you retire (and beyond if you wish).

Can you choose any AVC provider that you wish?

No.  AVCs are largely obsolete nowadays. There are a few gems out there still and its mainly public sector where they still exist.    The need for companies to offer an AVC ended in 2006 and many have not been updated since then.     In the meantime, stakeholder pensions have come and gone (still available but niche nowadays), personal pensions recovered but are in decline as the main pension product, SIPPs, have taken over.      Plus, you have LISA for the under 40s.

You can choose your own individual provider  but the employer is the one that chooses which AVC they offer.

Which is the best one?

There is no one best solution.  The best will vary depending on what you are after and why.  

How old are you?   How much you are looking to put aside each month?  Do you plan earlier than main scheme age retirement?  Are you a basic rate or higher rate taxpayer?  (just a few Q to get started)

AlanP_2

ElephantBoy57 said:

Looking online, at my local government pension, it lists contact information for The Prudential and Scottish Widows for the AVC.

So I am learning more about AVCs, its like a bank account for your AVC payments, that you access once you retire. Is the AVC money then invested in the stock market?

Can you choose any AVC provider that you wish? Which is the best one?

You need to look at the investment options each offers through their LGPS AVC scheme and work out which fund(s) fit your asset alloaction strategy and objectives.

This sounds complicated, and it can be, but in reality you can probably put a line through many of those on offer straighaway.

How long will you be investing in to AVCs for and what will you use the pot for when you retire as that sets your investment horizon?

My wifer and I both have LGPS AVCs through Standard Life as that is who our county uses. My pot will be taken inside 24 months and used to clear the last bit of mortgage and some house improvements so I have gone low risk, low return as I have a short horizon. My wife's pot will remain invested for the remainder of her life so her horizon is a lot longer (hopefully!) hence the fund choices are much more aggrresive than mine as she has time for any market falls to be regained and benefit from longer term growth. We don't need her pot to provide regular monthly income, instead it will be used for big ticket items over the years e.g. long haul holidays (if they ever start up again).

What is your obective, time horizon, attitude to risk?

ElephantBoy57

dunstonh said:

There is no one best solution.  The best will vary depending on what you are after and why.  How old are you?   How much you are looking to put aside each month?  Do you plan earlier than main scheme age retirement?  Are you a basic rate or higher rate taxpayer?  (just a few Q to get started)

I am 59 and I may carry on working for a couple of years, maybe a lot longer.

But as AlanP_2 I intend to use it to pay off my mortgage. I believe a AVC will be right for me whilst I am working and paying tax, I earnt around £16k last year.

daveyjp

IIRC of Pru and Scottish Widows only Prudential offer salary sacrifice AVCs.

This may not apply if the OPs employer doesn't offer SS for AVCs, but they may do in future.

AlanP_2

ElephantBoy57 said:

dunstonh said:

There is no one best solution.  The best will vary depending on what you are after and why.  How old are you?   How much you are looking to put aside each month?  Do you plan earlier than main scheme age retirement?  Are you a basic rate or higher rate taxpayer?  (just a few Q to get started)

I am 59 and I may carry on working for a couple of years, maybe a lot longer.

But as AlanP_2 I intend to use it to pay off my mortgage. I believe a AVC will be right for me whilst I am working and paying tax, I earnt around £16k last year.

An LGPS AVC on it's own may not be the ideal solution for you then given your salary as you won't benefit from tax relief on more than (£16k - standard LGPS contribution) less your tax free allowance (£12.5k typically).

If you work out the amount you can contribute to an AVC to bring your taxable income down to the level of your tax allowance you will be mximising the AVC tax relief benefit.

If you can afford to pay more into a pension than that then open a personl pension / SIPP with a low cost provider and contribute to that as they will reclaim 20% tax relief from HMRC on your behalf and add it to your pot EVEN THOUGH you haven't paid tax on the money invested.

Overall contribution limit is your "relevant income" which for most people means salary.