AVC vs increase contributions (P/T)

OldClimber1

Hi, 
I have an employer pension but I work part time so have space to increase my contributions to match what they would be if I worked FT.  
Is it better to do this or to start an AVC instead?  
Thank you

Mark_d

Increasing our contribution is effectively making AVC, because your extra contribution is voluntary.

My employer offers standard contribution level up to 6%, which they match.  Any extra that I pay, above the 6% is not matched by the employer.  They call this AVC but it's nothing special.  All the money end up in the same pension fund.

OldClimber1

thank you.  So is there no difference in what benefits you get in a separate (but linked) AVC to the ones you get in the main empl pension then?  

justintime99

Look at the fees for setting up a stand alone SIPP vs increasing contributions to employer sponsored scheme.
Would standalone SIPP give access to wider range of funds to invest in. Particularly, if the funds in the employer scheme have fairly high ongoing charges.
Does the employer scheme allow you to retire when you want to (subject to Govt regulations)? - ie you don't need company permission to retire.

Kernowshep

Some AVC schemes would be more beneficial than a separate SIPP e.g. if payments are made by salary sacrifice and the employer adds their NI savings, or if the AVC pot can be taken tax free at the same time as the main DB pension as in the case of the LGPS.

Terwirl

Can you please advise if you are talking about increasing payments to a defined benefit or defined contribution pension as the advice would be different depending on the answer. 

dunstonh

Is it better to do this or to start an AVC instead?  

Does your employer offer an AVC?   Most schemes do not nowadays.  The requirement to offer an AVC was removed in 2006 and nowadays, its really only the public sector pensions that still offer it.

If you are in a defined contribution scheme, then you typically wouldn't use an AVC anyway.  You would just increase your personal contributions to the workplace pension.    Or you would use an individual pension.   It really depends on whether salary sacrifice is available or not and if you want to choose investments that are not available in the workplace pension or the charges of the workplace pension are not as good as an individual scheme.

If you are in a defined benefit scheme, especially public sector, you may find that an AVC is not the only option available to you.    Some of them have hybrid schemes where you can pay to add fixed amounts of income added.