Reduce AVCs now or continue at same level?

What_time_is_it

Hi.
I currently have an average salary DB pension scheme which offers AVCs into a DC scheme too. I've been paying additional contributions into this DC "pot" for the past few years and it's built up quite nicely. However the current market trend is clearly downwards and still dropping. Should I reduce (or stop?) my AVCs during the current climate? Or continue paying them as before?
For info, I get both tax and NI relief on these contributions so effectively pay 66.75p for every £1 invested.
Thanks!

ussdave

Generally people suggest maintaining or even increasing during a downturn.  Often it is seen as an opportunity to buy units at a "discount" (as they are cheaper to you than they were the month before).

This assumes that eventually the markets recover, which historically they have....but it could be a number of years before they do.

What_time_is_it

Thanks USSDave. Your username suggest you might well be in the same pension scheme as I am!

I've heard people say the same about increasing contributions during a downturn, but is it not better to wait until the nearer the bottom of the trough before riding the peak back up again?

I really can't decide! But the tax and NI efficiencies are leading me in the direction of continuing to contribute for the time being at least. Help!

What_time_is_it

@ussdave - Just out of interest, which IB funds do you currently have your contributions invested in?

Snot

But how will you know when we are nearer the bottom?  All those highly paid fund managers have no idea.
Chances are you will still be on the side-lines doing nothing and miss the dip and subsequent recovery.
Keep on drip feeding and getting the tax breaks, in 10yrs+ this will hopefully just be a blip.

manetti

What_time_is_it said:

...but is it not better to wait until the nearer the bottom of the trough...

How will you know when we have reached the bottom of the trough?

What_time_is_it

manetti said:

What_time_is_it said:

...but is it not better to wait until the nearer the bottom of the trough...

How will you know when we have reached the bottom of the trough?

That's a good point of course! 

QrizB

What_time_is_it said:

I've heard people say the same about increasing contributions during a downturn, but is it not better to wait until the nearer the bottom of the trough before riding the peak back up again?

If you can reliably judge the bottom of the dip, you'll be posting to the forum from the deck of your private yacht moored just off the beach of your private island.

(With apologies to whoever it was I stole this phrase from.)

What_time_is_it

QrizB said:

What_time_is_it said:

I've heard people say the same about increasing contributions during a downturn, but is it not better to wait until the nearer the bottom of the trough before riding the peak back up again?

If you can reliably judge the bottom of the dip, you'll be posting to the forum from the deck of your private yacht moored just off the beach of your private island.

(With apologies to whoever it was I stole this phrase from.)

Fair point! More likely from my dinghy in the local pond, just behind Wilkos.

Brie

What_time_is_it said:

QrizB said:

If you can reliably judge the bottom of the dip, you'll be posting to the forum from the deck of your private yacht moored just off the beach of your private island.

(With apologies to whoever it was I stole this phrase from.)

Fair point! More likely from my dinghy in the local pond, just behind Wilkos.

Your Wilkos has a  pond?  Mine just has a pot hole in the parking lot.  I go and float leaves on it.

ussdave

What_time_is_it said:

Thanks USSDave. Your username suggest you might well be in the same pension scheme as I am!

I've heard people say the same about increasing contributions during a downturn, but is it not better to wait until the nearer the bottom of the trough before riding the peak back up again?

I really can't decide! But the tax and NI efficiencies are leading me in the direction of continuing to contribute for the time being at least. Help!

I think others have already answered this as you've seen Arguably, increasing your contributions is also timing the market so the general wisdom is really to just "stick to the plan".  Presumably you're just salary sacrificing a percentage of your salary at the moment?  I'd keep at it, and if you have a planned increase in the future (e.g. for a promotion or after a spine point increase), stick to that too.

You've guessed right about which scheme I'm in.  I'm currently sacrificing an extra 5%, which is actually the lowest I've put in for a while but I've had to drop it from a much higher 14% due to lifestyle changes/events (wedding, new house, etc) rather than based on market conditions

What_time_is_it said:

@ussdave - Just out of interest, which IB funds do you currently have your contributions invested in?

Nearly all in global equities.  I have a small percentage in the growth fund (which built up during the 1% match days when I just went with the default options) and a tiny amount of emerging market (which I contributed to for a couple of months and then changed my mind about).

If you ignore all the extra contributions this year, the value has stayed fairly level   I'm not too fussed though.... I'm fairly bought in to the idea of the stock recovering eventually so I see it as cheap purchases... and at the age of 40 I still have a long time to go before I'll be drawing the money.