Increasing pension savings: AVC's versus standing order to Peoples Pension

DietIrnBru

As it currently stands - I'm enrolled in the NHS Scotland Pension , which takes the standard 9% pre tax from my wage. I also doing agency shift which has auto enrolled me in the Peoples Pension. That takes around 5% but I do an AVC to make it up to 9%.

Being a late started to a pension - currently 39 - which I started at aged 31. I am aware that time marches on. With a view to accumulating more savings and having no desire to work till they put me in the grave, I am looking to up my pension savings.

Question being, is it more efficient to increase my contributions to my existing Peoples Pension via AVC? My impression is it would be, both for admin and tax reasons (overtime often sees me trip into the high rate tax band). Or make standing orders to Peoples Pension - albeit with a downside that a Standing Order it wouldnt take account if I was doing less work in a given month and the sum would remain the same.

My take home pay before tax was around £48,000. I am also saving around £25 pcm into my lifetime ISA - just as a tax free lump sum for my inevitable coach trips and pottery classes,

dunstonh

Question being, is it more efficient to increase my contributions to my existing Peoples Pension via AVC?

AVCs are largely out of date nowadays.  The product was effectively put on life support back in 2006.   Most providers no longer offer an AVC but then they dont need to as most employers allow you to choose your individual contribution levels to their main or auto-enrolment scheme.    Is there any reason you have chosen an AVC instead of increasing the Peoples Pension?

Or make standing orders to Peoples Pension - albeit with a downside that a Standing Order 

I dont believe they will take standing order contributions.  It will be payroll or direct debit.

Have you considered the options available within the NHS pension scheme?  

DietIrnBru

dunstonh said:

Question being, is it more efficient to increase my contributions to my existing Peoples Pension via AVC?

AVCs are largely out of date nowadays.  The product was effectively put on life support back in 2006.   Most providers no longer offer an AVC but then they dont need to as most employers allow you to choose your individual contribution levels to their main or auto-enrolment scheme.    Is there any reason you have chosen an AVC instead of increasing the Peoples Pension?

I've increased the deductions from my salary - it is showing as an AVC. It is not matched my by employer, but I knew that before paying the extra.This is on top of my auto enrolment minimum contribution.

Or make standing orders to Peoples Pension - albeit with a downside that a Standing Order 

I dont believe they will take standing order contributions.  It will be payroll or direct debit.

Have you considered the options available within the NHS pension scheme?  

Peoples Pension do take direct debits or lump sum payments. Not a standing order - but the sentiment was the same.

https://thepeoplespension.co.uk/help/knowledgebase/make-personal-payments/

Have you considered the options available within the NHS pension scheme?  

It has been considered - but the purchase of additional NHS pensions are very restrictive. It is a fixed amount to be paid over a fixed period - or make a lump sum. I dont have the lump sum and I want to be able to vary my payments if circumstances see me affording less. The Peoples Pension offer that flexibility.

phynix_uk

AVCs typically run alongside defined benefit pensions, there are less of them around primarily due to the defined benefit world being less common. They do still have a purpose and should be considered.
If you were comparing the NHS AVC with a standalone defined contribution pension then it may be cheaper but have less options at the point of accessing it like no drawdown and limited fund options however, it is likely that you can benefit from salary sacrifice when paying into it. I would assume (and I may be wrong) that the Peoples Pension will not offer this as it was probably set up with a former employer so that would mean you would have to pay tax and NI before paying into it. You will benefit from basic rate tax relief but you won't get the 12% NI repaid. This essentially puts your NHS AVC 12% up on the Peoples Pension on day one. Salary sacrifice is the deal breaker here.

DietIrnBru

The Peoples Pension is a current pension with a current employer - it is my nursing agency that set it up - payments are taken off my shift wage as and when I do the ad hoc shifts. My autoenrolment in that pension was set at a rate of 4%. I contacted the payroll team to set my deduction at 9%. The employer contribution remained the same. The extra contribution is listed on my payslip is listed as a TPP (the peoples pension) AVC. This is taken as salary sacrafice.

MX5huggy

The Salary Sacrifice is as said the clincher. £100 into to pension only costs you £68 in take home pay. Even less if you pay student loan. The limitation is you can’t Sacrifice more then would leave you with less than National Minimum Wage £10.42 per hour so if you’re on £20.84 you could Sacrifice 50%.