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Civil Service Alpha, buy added pension or AVC?

Beth466
Posts: 2 Newbie

I'm so confused about pensions. I'm 50, have been in Alpha scheme for 3 years. I want to put in a lump sum but don't understand the difference between buying added pension or AVC. I have some savings in ISAs, but no other pension.
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My own experience with pension and im now just retired I wouldnt trust them with any money. i would maximize ISA and the find the best fixd rate bond. or gamble with premium bonds you could be lucky. but the pension companies ,in my opinion are maximizing share holders returns and not evenreturning as much as a good savings account0
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Beth466 said:I'm so confused about pensions. I'm 50, have been in Alpha scheme for 3 years. I want to put in a lump sum but don't understand the difference between buying added pension or AVC. I have some savings in ISAs, but no other pension.1
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Beth466 said:I'm so confused about pensions. I'm 50, have been in Alpha scheme for 3 years. I want to put in a lump sum but don't understand the difference between buying added pension or AVC. I have some savings in ISAs, but no other pension.There are two main types of pension. Defined Benefit, and Defined Contribution.Defined Benefit pensions guarantee you an (inflation protected) amount of money every year from retirement, for the rest of your life. No matter how long you live. In other words, the benefit you get is defined.Defined Contribution pensions are a pot of money that is invested until (and while) you retire. There are no guarantees about what it will be worth when you need it. Over a long horizon, sensible investments usually do well. But a couple of bad years right before you plan to retire could mean you need to change your plans.As someone in the Civil Service Alpha scheme, you have a Defined Benefit pension. If your annual statement says your pension is worth, for example, £10,000 then it means you will get that amount every year for the rest of your life, from your retirement age. (With only three years in alpha so far it will be a lot lower than that, but it really starts to add up over time!)In a Defined Contribution scheme the amount in your pot is what you have to live on for the rest of your life (unless you have other reserves, obviously). And the value of it can go up and down over time, depending on how what it's invested in performs.Now to answer your question:Buying added pension increases the amount of Defined Benefit Alpha pension you have for when you retire.Buying AVCs gives you a little Defined Contribution pot, that you can add to alongside your DB pension.There's no intrinsically right answer as to which is better - really depends on what you're trying to do.But if you like the security of knowing what you will have each year in retirement, Added Pension can give you more of that. If you want a pot of money you can draw on in retirement - either to pay off big unexpected expenses, or to help supplement retirement income until you can draw your state pension, if you expect to retire earlier than your state pension age, then AVCs can give you some flexibility there.If you decide to buy Added Pension by lump sum, you should get on that immediately as it looks like the factors are changing from April 2024, and you will be able to buy less Added Pension for the same amount of money from that time onwards.5
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If I buy added pension but just for myself and not for dependents, does that mean if I die, that extra money paid in just disappears? Both if I die before and after I start getting my pension?0
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gmje said:My own experience with pension and im now just retired I wouldnt trust them with any money. i would maximize ISA and the find the best fixd rate bond. or gamble with premium bonds you could be lucky. but the pension companies ,in my opinion are maximizing share holders returns and not evenreturning as much as a good savings accountYou can invest in the same things with a pension as with an ISA (depending on provider).The pension has limits on when you can take the money out, but also (usually) has tax advantages. The actual investments, and the degree to which you directly manage those investments, is usually a matter of personal preference to one degree or another.Saying "invest with an ISA, rather than a pension, because the pension companies are maximising shareholder returns" is - at best - meaningless.9
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Universidad said:gmje said:My own experience with pension and im now just retired I wouldnt trust them with any money. i would maximize ISA and the find the best fixd rate bond. or gamble with premium bonds you could be lucky. but the pension companies ,in my opinion are maximizing share holders returns and not evenreturning as much as a good savings accountYou can invest in the same things with a pension as with an ISA (depending on provider).The pension has limits on when you can take the money out, but also (usually) has tax advantages. The actual investments, and the degree to which you directly manage those investments, is usually a matter of personal preference to one degree or another.Saying "invest with an ISA, rather than a pension, because the pension companies are maximising shareholder returns" is - at best - meaningless.5
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Beth466 said:If I buy added pension but just for myself and not for dependents, does that mean if I die, that extra money paid in just disappears? Both if I die before and after I start getting my pension?You can read the full information on death benefits here:There's information about how both your regular Alpha pension and any Added Pension that you buy would be affected.The short version is that a proportion of your regular Alpha pension would be payable to a dependent if you were to predecease them, but the Added Pension depends on whether you buy "Self" or "Self and Dependents" Added Pension.However other benefits are payable if you die before retirement, and it works slightly differently depending on whether you still paying in to Alpha, or whether you have already left Alpha and are no longer an active member.2
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