AVC’s aged 57

91highstreet

I am looking to reduce my tax burden ( currently 40%) by investing in AVC’s through Standard life ( I have an NHS pension but it dies with me ) I’m overwhelmed by the choices and not sure which would work best for me at my age  58 yrs I think I  would like to drawdown as I may finish work earlier than 67 or at least have the option 
I’m looking to invest 1k per month any advice on which funds would be best for me would be much appreciated 
I know I should speak to a financial advisor but I am not sure it is worth their while 
many thanks for any help 

AlanP_2

If your objective is to reduce your tax bill then it doesn't matter what investments you choose inside the pension 🙂.

So, apart from reducing your tax bill what is your timescale and objective?

Is it to have a pot of money at age 65 say that can be used to buy a new Tesla or is it to have a pit of money that you can use for the following 20/30 years to supplement your NHS pension?

Or is it to have a pot of money that can be left as as an inheritance when you pass away?


A DC pensions, whether SIPP or AVC can achieve all those but you would probably use different investment options.


Do you have enough taxable income in the 40% bracket to cover an extra £12k of contributions or will some of it only attract 20% tax relief?


What are the pros and cons of using the AVC option as opposed to separate SIPP?

I was in the LGPS anc the AVC pot could be taken tax free (pro) at the same time as main scheme benefits (con as less flexibility).

Albermarle

I know I should speak to a financial advisor but I am not sure it is worth their while 
That is correct. Even if they were interested the fees would be very high relative to your investment of £1000 a month. 

Reading regularly through this forum and the Savings and Investments forum, would probably help making these sort of investment choices.
Normally with SL, it is easy enough to change investments, so do not worry too much initially about making the 'wrong' choice. With investing that is not always very clear anyway.

91highstreet

Thank you both that is reassuring it seemed to me I would have to go quite a way wrong to lose the 40% saving I am making via the tax relief , but it’s such an unfamiliar world to me . 
yes I can afford £1000 monthly and stay over the 40% tax bracket 
mainly I would like to supplement my Nhs pension
I chose AVC over Sipp  as it is taxed at source so less hassle and also Sipps seem to require an even greater level of investment knowledge than I clearly have 
so something relatively safe simple and basically a sort of savings account whereby I avoid huge tax bills is what I am after , my NHS pension is not large and on taking out the AVC at pension age or before I  will be nowhere near the 40% higher tax rate I am currently paying so just trying to give myself a little breathing space at retirement 
thank you both for your advice 

Lowtrawler

91highstreet said:

I am looking to reduce my tax burden ( currently 40%) by investing in AVC’s through Standard life ( I have an NHS pension but it dies with me ) I’m overwhelmed by the choices and not sure which would work best for me at my age  58 yrs I think I  would like to drawdown as I may finish work earlier than 67 or at least have the option 
I’m looking to invest 1k per month any advice on which funds would be best for me would be much appreciated 
I know I should speak to a financial advisor but I am not sure it is worth their while 
many thanks for any help 

It sounds like you want to create an early retirement fund to tide you over until the NHS and state pension kicks in, is that correct? If so, as your pensions will kick in at 67, you must be looking at a 6 or 7 year time horizon?

Equity investments are usually recommended if you have a longer time horizon than 5 years but, within 2 years, your remaining time horizon will be less than 5 years. Hence, you probably don't want an equity heavy investment. The choice will really depend on how much risk you are comfortable taking. At one end, you could invest in money market funds (similar to a bank savings account) and at the other end you could invest in junk bonds (risk of heavy losses). A middle ground might be a 60:40 split multi-asset fund (60% equities, 40% bonds) or even a 50:50 or 40:60 multi-asset fund. It will all depend on your attitude to risk and nobody has a crystal ball to tell you which will provide the best outcome.