SIPPS vs AVCs

FrankRizzo

Hello,

I am struggling to understand if there is any benefit of paying into a SIPP over an AVC?

Any help appreciated!

Thanks

Albermarle

What pension scheme are you currently in ?

dunstonh

I am struggling to understand if there is any benefit of paying into a SIPP over an AVC?

AVCs tend to be old hat but (old fashioned and limited) but some can carry advantages.    SIPPs are your all-singing, all-dancing option (assuming you are not looking at a provider that refers to its product as an SIPP but isn't actually a SIPP).    Which is best will depend on the comparison of the AVC and the SIPP (assuming there are no other options being considered, like added years or hybrid schemes that exist in the public sector).

Universidad

FrankRizzo said:

I am struggling to understand if there is any benefit of paying into a SIPP over an AVC?

In a net pay arrangement with AVCs then it's slightly easier to get the right amount of tax relief if you're a higher rate tax payer. That's definitely a benefit to AVCs, but I'm not sure it would swing it for most people.

A couple of benefits of a SIPP is that it isn't tied to your workplace pension in any way, and you tend to have more investment options.

That said occasionally AVCs can offer some advantages by virtue of being tied to your workplace pension. USS has a couple of good ones.

FrankRizzo

Thanks for the help!

Do you have to do any sort of HMRC Self Assessment with a SIPP?

Albermarle

FrankRizzo said:

Thanks for the help!

Do you have to do any sort of HMRC Self Assessment with a SIPP?

If you are a basic rate taxpayer then no contact with HMRC needed at all . The provider automatically adds basic rate tax relief to your contributions. You do have a responsibility to not add more contributions than you are eligible for tax relief for.

If you are a higher rate taxpayer, you need to inform HMRC of your gross contributions, so they can can calculate any higher rate tax relief you are due. Still no need to fill in self assessment though.

ShimalayaFlimflam

I'm interested in this as have recently joined the Civil Service Pension scheme, already have a SIPP and am trying to decide whether to go down the AVC route or to add to my SIPP after all workplace deductions. Any advice would be gratefully received. 

Thanks

dunstonh

ShimalayaFlimflam said:

I'm interested in this as have recently joined the Civil Service Pension scheme, already have a SIPP and am trying to decide whether to go down the AVC route or to add to my SIPP after all workplace deductions. Any advice would be gratefully received. 

Thanks

What is best will depend on your objectives.  There are scenarios that can favour the AVC or the SIPP or a combination of the two.  You also have the added pension option too (which is often the best of the three).  Lifetime ISAs can also come into play as an option and S&S ISAs.