not 100% sure about this stuff!!

leewev

I have a final salary company pension scheme that I can retire from at 65 in 2036, but in 2035 I will have worked at the place for 40yrs and I was thinking that is enough for me.
But If I go one year early I get a 5% reduction in my yearly pension.
my question is what do AVC's do as such? will they top up this 5% loss? are they worth it?
I know 2035 is a while away yet, but If I need to start planning AVC's then I'm thinking the sooner the better?
any help would be greatly appreciated

ussdave

Can you name your pension scheme, current age and total accrued pension and AVC amount?

Albermarle

5% reduction for one year is normal, if slightly on the high side. Of course you will get paid for 12 months longer, so should approx even out.

An AVC will not affect the actual DB pension payment, but would be a separate pot that could obviously come in useful. Exactly how will depend on the scheme. Hence the questions in the previous post.

leewev

My pension is a PAS+ University one, I'm 54 at the moment, The value I don't know at the moment as the scheme has just been transferred to a new company. AVC's was thinking of putting in £100 a month?

daveyjp

AVCs are one way of investing to bridge a gap to state pension age, or make up a DB scheme early retirement reduction.

Whether that is the right option for you over other invetestment options depends on your retirement plans and the benefits of the AVC scheme(s) offered.

poseidon1

leewev said:

I have a final salary company pension scheme that I can retire from at 65 in 2036, but in 2035 I will have worked at the place for 40yrs and I was thinking that is enough for me.
But If I go one year early I get a 5% reduction in my yearly pension.
my question is what do AVC's do as such? will they top up this 5% loss? are they worth it?
I know 2035 is a while away yet, but If I need to start planning AVC's then I'm thinking the sooner the better?
any help would be greatly appreciated

A relative of mine set up an AVC  ( with Standard Life) alongside his DB scheme when he was in his 30s precisely to give himself the option to retire earlier than age 65 mandated by his scheme.

In the end he retired at age 57 (9 years ago)  due to getting close to the LTA and triggering annual LTA charges if he stayed with his employer. The AVC helped to achieve this outcome.

dunstonh

my question is what do AVC's do as such? will they top up this 5% loss? are they worth it?

Depends on the AVC.   Some in house AVCs can be linked to the main scheme in respect of tax free cash and those are usually best taking at the same time as the main scheme.    However, if there is no such linking, then that would not be a problem.  Although sometimes the scheme rules require an AVC to be taken at the same time or after leaving but not before.

Free standing AVCs were reclassified as personal pensions many years ago and can be taken early.

Some people will use personal pensions or SIPPs to fund a gap before the main scheme.  Especially where the AVC offers no real benefit compared to the PPP/SIPP.