Invest into S&S ISA or AVC

jonnypb

Currently working in local government and so far have a local government pension for the last 25 years.  Hate the thought of having to work until I'm 68, so looking to do something that may help to retire a few years earlier and have 2 options that I can think of.

Pay into an AVC at work, or start up a stocks and shares ISA.

Benefits of the AVC is that to pay £250 a month into it, it'll only cost me £180 in real money with the tax relief and NI savings, so that's a 38% uplift as soon as the money goes into it.  I can also take 100% of the AVC tax free as retirement income.

The disadvantage is that it will be locked away and untouchable.

Other option would be to pay that £180 into a S&S ISA (S&P 500) and let that build up over the next 10-15 years.  I could also maybe put a small lump sum in as well to start off of between 5k-10k.

Really undecided what to do.  I'm thinking the AVC is probably the best option financially as you get that automatic uplift from day 1, but the money in the S&S ISA would be there for any unforeseen circumstances.

Currently a normal rate tax payer.

MX5huggy

The AVC’s are a brilliant cherry on top of the LGPS cake. You’ve basically got the maths right. If the purpose of the saving is to enable you to take your pension before 68 then the AVC is the best option to take. 

I put about 1/3 of my salary in to mine. But I have about 6 months salary in easy access savings (happy to let this fluctuate through the year). And an S&S ISA  (global index fund) which has a further 6 months. 

What I don’t do is pay anything extra towards mortgage. 

On-the-coast

Do both. 

Invest (long-term) in that unbeatable AVC. 

Put that 5-10k in an ISA…
think about how much risk you can afford to take with the lump sum. 

Voyager2002

You do have a third option, which is to open a SIPP. You would still get the tax relief (although not the NI concession) and like an AVC the money would be locked away until you reach the age of 55. Some providers offer generous cash sweeteners to people who open a SIPP.

Other key information: what charges would you face on your AVC? And would you be in control of how the money was invested (as with a SIPP or ISA)?

jonnypb

Voyager2002 said:

You do have a third option, which is to open a SIPP. You would still get the tax relief (although not the NI concession) and like an AVC the money would be locked away until you reach the age of 55. Some providers offer generous cash sweeteners to people who open a SIPP.

Other key information: what charges would you face on your AVC? And would you be in control of how the money was invested (as with a SIPP or ISA)?

I've booked a 1 to 1 to discuss the AVC in more detail, but with it being Local Government apparently it was one of the few AVC schemes where you can take the full amount tax free upon retirement.  You are able to pick where the money is invested as well and select the risk level.

jonnypb

MX5huggy said:

The AVC’s are a brilliant cherry on top of the LGPS cake. You’ve basically got the maths right. If the purpose of the saving is to enable you to take your pension before 68 then the AVC is the best option to take. 

I put about 1/3 of my salary in to mine. But I have about 6 months salary in easy access savings (happy to let this fluctuate through the year). And an S&S ISA  (global index fund) which has a further 6 months. 

What I don’t do is pay anything extra towards mortgage. 

I was thinking about over paying the mortgage, but it's not huge (Less than 50k), however that may increase slightly if I move.

alco_pop

jonnypb said:

Voyager2002 said:

You do have a third option, which is to open a SIPP. You would still get the tax relief (although not the NI concession) and like an AVC the money would be locked away until you reach the age of 55. Some providers offer generous cash sweeteners to people who open a SIPP.

Other key information: what charges would you face on your AVC? And would you be in control of how the money was invested (as with a SIPP or ISA)?

I've booked a 1 to 1 to discuss the AVC in more detail, but with it being Local Government apparently it was one of the few AVC schemes where you can take the full amount tax free upon retirement.  You are able to pick where the money is invested as well and select the risk level.

Potentially, can take all as cash, but that would depend on your pension, so may not be guaranteed. Also does your employer offer AVC Wise?

jonnypb

alco_pop said:

jonnypb said:

Voyager2002 said:

You do have a third option, which is to open a SIPP. You would still get the tax relief (although not the NI concession) and like an AVC the money would be locked away until you reach the age of 55. Some providers offer generous cash sweeteners to people who open a SIPP.

Other key information: what charges would you face on your AVC? And would you be in control of how the money was invested (as with a SIPP or ISA)?

I've booked a 1 to 1 to discuss the AVC in more detail, but with it being Local Government apparently it was one of the few AVC schemes where you can take the full amount tax free upon retirement.  You are able to pick where the money is invested as well and select the risk level.

Potentially, can take all as cash, but that would depend on your pension, so may not be guaranteed. Also does your employer offer AVC Wise?

I believe they do offer AVC Wise as it's a term that I've heard them use.

nottsphil

Is the LGPS still paying out at 60?

daveyjp

jonnypb said:

alco_pop said:

jonnypb said:

Voyager2002 said:

You do have a third option, which is to open a SIPP. You would still get the tax relief (although not the NI concession) and like an AVC the money would be locked away until you reach the age of 55. Some providers offer generous cash sweeteners to people who open a SIPP.

Other key information: what charges would you face on your AVC? And would you be in control of how the money was invested (as with a SIPP or ISA)?

I've booked a 1 to 1 to discuss the AVC in more detail, but with it being Local Government apparently it was one of the few AVC schemes where you can take the full amount tax free upon retirement.  You are able to pick where the money is invested as well and select the risk level.

Potentially, can take all as cash, but that would depend on your pension, so may not be guaranteed. Also does your employer offer AVC Wise?

I believe they do offer AVC Wise as it's a term that I've heard them use.

AVC wise are the company that LGPS members organisations contract with to operate and manage the LGPS salary sacrifice AVC system.  All invesment decisions sit with the member.

LGPS will still pay out at 60 with deductions for taking the pension early.  AVCs can be used to make up that difference.

MX5huggy

nottsphil said:

Is the LGPS still paying out at 60?

Currently you can take your LGPS between 55 and 75, rising to 57 in 2028. For the current scheme retirement age is State Pension Age so you take a fairly high reduction taking it 12 years early. 

Older. Scheme retirement rules are complicated including the rule of 85.