AVCs for a DB pension - still worth it?

Unpensioned56

Hi, I wonder if anyone would be able to help me figure out if it's worth continuing to pay AVCs into my DB pension to buy added years? It's the USS scheme which is now hybrid DB/DC. I have an old AVC to buy missing years of service, but the value of those is capped at my salary in 2016  while the contributions are a percentage of my current (higher) salary. I'm about 7 years off retirement and I'm paying £400 pcm. It takes about 6.5 years to accrue a year of service which adds £825 onto my pension, so about £125 a year after retirement for £4800 now. The £825 was cpi indexed but now that's capped at 2.5%, although this may be restored. I could put the money into my DC pot instead. I'm planning on retiring at 63-65 . I do like security and guaranteed returns but I'm starting to think it's costing a LOT for a little.  Thanks to anyone who can help!

Doctor_Who

I am a deferred (2020) USS pension holder who paid the maximum allowed added AVCs for many years. I argued strongly against the 2016 change to added years AVCs where the price paid continued to be linked to your current salary, but the pension bought was linked to your 2016 salary. For me the added years AVCs were a good investment (inflation linked to CPI or the complicated 10% capped CPI calculation). I'm sure that the calculated 'return' on my AVCs was that they would payback after ~15 years, less with higher inflation. Your payback looks to be ~38 years (again, inflation will reduce this). Doesn't the 2.5% CPI cap only apply to pension accrued after April 2022, with the more generous increases applying before that? If you like security, then the added years AVC is great, but not sure I'd be interested now if it's a ~38 year payback window.

Unpensioned56

Thanks @Doctor_Who; I believe you're right, the 2.5% cap only applies to pension accrued after April 22. Even so, it's not looking good. This isn't the kind of calculation either USS or financial advisors are interested in offering!