AVC/new investor help please

MX5huggy

AliceBanned said:

Ok so I've made a start by today by setting up a transfer of 4% of salary into LGPS Prudential AVC. I've started with mostly cash fund and am going to decide my own funds..leave the money in for as long as I can, maybe 10 years. I'll also be using it to educate myself for future savings and investments, if that makes sense as I am not familiar with investing or even saving for that matter. I need to overpay my mortgage so for the foreseeable future, depending on salary, may not be able to also have an ISA or pay into the APC yet, but would like to have more savings too - I only have a small amount in premium bonds so far.

Be wary of building up cash in the AVC, you’ll end up with a big pot of cash, that you’ll then be stuck with the decision when to invest it, but drip feeding (called dollar cost averaging) it into funds is probably preferable. Your fund selection is probably very limited, mines 7 (including cash). 50% into the international (including UK) equities, 25% international ESG fund, 25% the With Profits Fund. There’s no real theory to it just spreading the money around. 

AliceBanned

Dazed_and_C0nfused said:

AliceBanned said:

Dazed_and_C0nfused said:

AliceBanned said:

Another question is when I applied for the overtime (just completed) I was in the 20% tax bracket, but in between starting and finishing it I also got promoted, so am now earning £51k. The overtime is going to pay about £1500 gross. Will the tax rate be worked out by HMRC over the next few weeks and be adjusted? Or will I need to notify them? I am hoping to avoid 40% rate on both salary and overtime but the AVC payments won't start until about the same time as the overtime pay, or later!

There can be a big difference between what you earn and what is taxable.

A £51k salary could easily equal taxable pay of only say £45k.

What does your end of October payslip (or November if available) show your taxable pay for the (tax) year to date as?

Ah ok I will get back to you as November payslip may be issued shortly. I hadn’t factored in other payments eg my main pension scheme payments, is that what you mean?

Yes, if you're in a net pay scheme then no tax relief gets added to those contributions, the tax benefit is from your salary being say £50,000 but after 10% pension contribution you only have £45,000 of taxable income.

It looks like it’s net pay scheme. I am paying in 8% (plus in future 4% into AVC) so I don’t think I’ve paid 40% tax. The ‘taxable pay’ is slightly lower than pay but it’s confusing this month as I have back pay for inflation. Thanks Dazed and Confused (definitely how I feel)😅

AliceBanned

MX5huggy said:

AliceBanned said:

Ok so I've made a start by today by setting up a transfer of 4% of salary into LGPS Prudential AVC. I've started with mostly cash fund and am going to decide my own funds..leave the money in for as long as I can, maybe 10 years. I'll also be using it to educate myself for future savings and investments, if that makes sense as I am not familiar with investing or even saving for that matter. I need to overpay my mortgage so for the foreseeable future, depending on salary, may not be able to also have an ISA or pay into the APC yet, but would like to have more savings too - I only have a small amount in premium bonds so far.

Be wary of building up cash in the AVC, you’ll end up with a big pot of cash, that you’ll then be stuck with the decision when to invest it, but drip feeding (called dollar cost averaging) it into funds is probably preferable. Your fund selection is probably very limited, mines 7 (including cash). 50% into the international (including UK) equities, 25% international ESG fund, 25% the With Profits Fund. There’s no real theory to it just spreading the money around. 

Yes, it’s limited to 10. I want to go for passive funds I think. Such a minefield looking at all the info! Some of the charts seem to show growth much higher than any savings. But I guess that’s the point! I was reading a book which recommended bonds and gilts but I think things maybe have changed since it was written!. Book by Merryn Somerset Webb, for women which helped to demystify it all a bit. It’s quite scarey but I do want to learn more and invest so have made a start! 

Mutton_Geoff

MX5huggy said:

Be wary of building up cash in the AVC, you’ll end up with a big pot of cash, that you’ll then be stuck with the decision when to invest it, but drip feeding (called dollar cost averaging) it into funds is probably preferable

I'll translate that for you - it's pound cost averaging  Just to save the OP searching for the US term and ending up getting confused by websites referring to 401k etc.

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/how-it-works/what-is-pound-cost-averaging

AliceBanned

Mutton_Geoff said:

MX5huggy said:

Be wary of building up cash in the AVC, you’ll end up with a big pot of cash, that you’ll then be stuck with the decision when to invest it, but drip feeding (called dollar cost averaging) it into funds is probably preferable

I'll translate that for you - it's pound cost averaging  Just to save the OP searching for the US term and ending up getting confused by websites referring to 401k etc.

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/how-it-works/what-is-pound-cost-averaging

Great thanks Mutton Geoff! Really useful article.

AliceBanned

I went to a seminar yesterday by AVCWise - this is new with our LGPS. I can’t see anything different- still a shared cost AVC but via their portal. Does anyone know anything about AVCWise? Prudential still haven’t taken any payments into my AVC so I’m trying to find out from payroll what is going on! Its not ideal when people are keen to save to make it a difficult process.

cloud_dog

AliceBanned said:

I went to a seminar yesterday by AVCWise - this is new with our LGPS. I can’t see anything different- still a shared cost AVC but via their portal. Does anyone know anything about AVCWise? Prudential still haven’t taken any payments into my AVC so I’m trying to find out from payroll what is going on! Its not ideal when people are keen to save to make it a difficult process.

Welcome to the hell that is Prudential!

https://forums.moneysavingexpert.com/discussion/6240757/problem-with-lgps-avcs-with-prudential#latest

AliceBanned

cloud_dog said:

AliceBanned said:

I went to a seminar yesterday by AVCWise - this is new with our LGPS. I can’t see anything different- still a shared cost AVC but via their portal. Does anyone know anything about AVCWise? Prudential still haven’t taken any payments into my AVC so I’m trying to find out from payroll what is going on! Its not ideal when people are keen to save to make it a difficult process.

Welcome to the hell that is Prudential!

https://forums.moneysavingexpert.com/discussion/6240757/problem-with-lgps-avcs-with-prudential#latest

😱😱I had no idea! When I spoke to Pru today they seemed to think it is my or my employer’s duty to inform them to take the money.

I cancelled it all because I decided to go via AVCWise. I’ll read the link, thanks as I really need to decide what to do next. I thought it was too good to be true. I can contact my union about it too as I’m a member. They previously intervened when Capita messed up our LGPS contributions!🙈

AliceBanned

So I received a letter from Pru - they did cancel it after all so it looks like no money will be taken. So I'll start again.

I've started trying to work out what's best looking at the overall picture. My other DC pot has lost almost £10k in the last year. It is Aeon Mastertrust with low fees, 0.4% because it is part of my previous employer's pension scheme, though I can't pay into it since I left. I have wondered whether to move it, put it into higher risk - I changed my pension age to 70 so that it isn't in the very low risk investments. I am 55 now. I will probably retire around 65. I may start a different thread about what to do with this as I'm not sure it's in the best place - pot has around £90k at moment. I worked there for 9 years and paid the minimum under the employer's scheme rules and the employer contributed so from zero I guess it's not too bad but I really started way too late with retirement planning!

cloud_dog

I don't think it is too late, but it may take more of a concerted effort

I (will) have a decent DB at age 65 and I was happily swimming along in my mind with retirement finances until I reached age 52(ish) and I started to question (on here actually) what I wanted and what I need to achieve, and the long and short was that I decided I wanted more in early retirement and the flexibility that a DC pot might offer.  So that is how we are focussed.  We sell some of our ISA investments each year to maximise pension contributions (via SS AVC) and as a HRT payer this is a nice feeling.  The sold investments help supplement the reduced income.