Spare Cash Pension or Savings ?

Heytheremrblue

dunstonh said:

Can you clarify, as currently you have said there is a DB pension but its actually a DC pension and now you are saying its an AVC (which would be in addition to a DB pension).

Does it invest in investment funds where the value changes daily or is it based on years of service?

The pension tax wrapper (DC) beats cash savings and ISAs when being used for retirement planning and assuming you are not going to breach the tax free cash lump sum limits.

Try and answer as best I can forgive my lack of knowledge ! 

It's def Defined Contribution

I already pay around £100 extra and it says added contribution next to that I thought that was AVC ? Added Voluntary Contribution ? Comes out of my wages.

It invests in funds

Albermarle

Heytheremrblue said:

dunstonh said:

Can you clarify, as currently you have said there is a DB pension but its actually a DC pension and now you are saying its an AVC (which would be in addition to a DB pension).

Does it invest in investment funds where the value changes daily or is it based on years of service?

The pension tax wrapper (DC) beats cash savings and ISAs when being used for retirement planning and assuming you are not going to breach the tax free cash lump sum limits.

Try and answer as best I can forgive my lack of knowledge ! 

It's def Defined Contribution

I already pay around £100 extra and it says added contribution next to that I thought that was AVC ? Added Voluntary Contribution ? Comes out of my wages.

It invests in funds

It can be confusing.

AVC has a specific meaning with relation to Defined Benefit schemes.

With a DC scheme like yours, if you add more than the minimum % it is not really technically called AVC's, although the term is sometimes used just to confuse us all even more.

Now to go back to your original post. You would almost certainly be better off putting into the pension due to the tax benefits.
However I think it is worth pointing out that although £110K sounds a lot, it is not really that much in pension terms if you want a decent income from it. Especially if you want to retire 7 years before the State Pension arrives. Also once you get your state pension, you will need more income on top of that.
Appreciate you have savings as well but the classic mistakes that many people make is to 
1) Underestimate the amount of money they need to build up 
2) Underestimate their life expectancy

I suggest some kind of plan would be useful, looking at your proposed expenditure in retirement. Then how you would fund that before and after the state pension arrives. Base it on say living until at least 90.

Probably then you will see more clearly whether retiring at 60 is really feasible or not. 

Heytheremrblue

Albermarle said:

Heytheremrblue said:

dunstonh said:

Can you clarify, as currently you have said there is a DB pension but its actually a DC pension and now you are saying its an AVC (which would be in addition to a DB pension).

Does it invest in investment funds where the value changes daily or is it based on years of service?

The pension tax wrapper (DC) beats cash savings and ISAs when being used for retirement planning and assuming you are not going to breach the tax free cash lump sum limits.

Try and answer as best I can forgive my lack of knowledge ! 

It's def Defined Contribution

I already pay around £100 extra and it says added contribution next to that I thought that was AVC ? Added Voluntary Contribution ? Comes out of my wages.

It invests in funds

It can be confusing.

AVC has a specific meaning with relation to Defined Benefit schemes.

With a DC scheme like yours, if you add more than the minimum % it is not really technically called AVC's, although the term is sometimes used just to confuse us all even more.

Now to go back to your original post. You would almost certainly be better off putting into the pension due to the tax benefits.
However I think it is worth pointing out that although £110K sounds a lot, it is not really that much in pension terms if you want a decent income from it. Especially if you want to retire 7 years before the State Pension arrives. Also once you get your state pension, you will need more income on top of that.
Appreciate you have savings as well but the classic mistakes that many people make is to 
1) Underestimate the amount of money they need to build up 
2) Underestimate their life expectancy

I suggest some kind of plan would be useful, looking at your proposed expenditure in retirement. Then how you would fund that before and after the state pension arrives. Base it on say living until at least 90.

Probably then you will see more clearly whether retiring at 60 is really feasible or not. 

Thanks my Wife will continue to work until retirement age and has an excellent work pension plus I have another private pension  and savings that should give me around 20k a year in interest by that time fingers crossed. I will however keep my options open !

Albermarle

and savings that should give me around 20k a year in interest

Wow that is a lot of cash.

You seem to have an inbalance between savings and investments, even taking into account your pension is invested.

Have you considered during your last few years of work, transferring significant lump sums from your savings to your pension. This would bring two advantages.

1) Tax relief on the lump sums ( up to a point depending on your salary level)

2) More money invested rather than in cash, which you would expect to be of financial benefit in the long term.

If you are a 40% taxpayer then that makes this an even more attractive option. Many of the regular contributors to this forum 'filled their boots' with tax relief in their last few years of working, by adding Tens of thousands of Pounds to their pension each year.

Heytheremrblue

Albermarle said:

and savings that should give me around 20k a year in interest

Wow that is a lot of cash.

You seem to have an inbalance between savings and investments, even taking into account your pension is invested.

Have you considered during your last few years of work, transferring significant lump sums from your savings to your pension. This would bring two advantages.

1) Tax relief on the lump sums ( up to a point depending on your salary level)

2) More money invested rather than in cash, which you would expect to be of financial benefit in the long term.

If you are a 40% taxpayer then that makes this an even more attractive option. Many of the regular contributors to this forum 'filled their boots' with tax relief in their last few years of working, by adding Tens of thousands of Pounds to their pension each year.

Yes I'm in a very fortunate situation at the moment and yes there is certainly an imbalance  I'm learning on the fly and will seek independent advice before I settle on a permanent strategy. 20% Taxpayer but I'm very wary of dropping large amounts into the pension but then again I don't really have a clue what I'm doing !