We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
The Forum now has a brand new text editor, adding a bunch of handy features to use when creating posts. Read more in our how-to guide
Another AVC Question
worcester1
Posts: 159 Forumite
I have been contributing to my company pension scheme for just over two years. I pay £150 and my employer matchback this with another £150 = £300 p/m in total. This is a money purchase scheme.
I recently had a job promotion at work - 11% payrise. I want to invest this increase into AVC (operated by my employer) to increase my pension for when I retire.
Do you think this is a good route to take to make additional pension contribution? Will any money contributed be tax free - taken out of my wage "SMART"/"Salary Sacrifies" before tax & NI?
I recently had a job promotion at work - 11% payrise. I want to invest this increase into AVC (operated by my employer) to increase my pension for when I retire.
Do you think this is a good route to take to make additional pension contribution? Will any money contributed be tax free - taken out of my wage "SMART"/"Salary Sacrifies" before tax & NI?
0
Comments
-
Hi.
If it is an AVC you pay NI but no tax, Salary sacrifice is no tax or NI.
JonathonI have worked for 5 years as a Pension Administrator and then a further year in a non-administrator pension role. I am not (and never have been) an adviser. Do not take anything I say as advice, it is information given on the best of my knowledge.0 -
Is AVC a good choice for extra pension contribution0
-
not unless your employer offers some incentive. AVCs are largely obsolete nowadays.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0
-
Is it any different if it is a Group AVC associated with an employer's Final Salary scheme?AVCs are largely obsolete nowadays.
In particular, relating to the ability to use the AVC to fund the tax-free lump sum.
With a Final Salary scheme, how is the maximum amount of tax-free lump sum calculated?0 -
Is it any different if it is a Group AVC associated with an employer's Final Salary scheme?
That is the only type of AVC nowadays. FSAVCs were converted to personal pensions in April 2006.In particular, relating to the ability to use the AVC to fund the tax-free lump sum.
As I said, unless the employer (or trustees) offers some incentive. Most do not have this TFC enhancement but if it exists, then it needs to be looked at.
Varies with the schemes. Ask for your scheme booklet.With a Final Salary scheme, how is the maximum amount of tax-free lump sum calculated?I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
The standard way under the new rules is that it is 25% of the value of the pension at retirement. The value of the pension when cash is taken from the Final Salary pension is 25% of (20 times the pension after the cash is deducted + the amount of cash taken)! - yes this is a circular formula but can be rearranged to work maximum cash based on the pension prior to deductions for cash.
However as Dunston points out individual schemes can offer something different to this.I have worked for 5 years as a Pension Administrator and then a further year in a non-administrator pension role. I am not (and never have been) an adviser. Do not take anything I say as advice, it is information given on the best of my knowledge.0 -
AVCs are largely obsolete nowadays.
Could I have a simple explanation as to why this is ? And is there a definitely better place for my £30pm then my AVC ?Hi, we’ve had to remove your signature. If you’re not sure why please read the forum rules or email the forum team if you’re still unsure - MSE ForumTeam0 -
AVCs used to be a cheap way to invest. Indeed it was their main advantage. Nowadays though you have stakeholder pensions, personal pensions and ISAs with better investment options, more flexiability and often lower costs without any of the tie in to the existing occ scheme.
As of April 06, employers no longer have to offer an AVC and many have already closed for new contributions. So, with all that in mind there is no reason to pay into an AVC any more unless there is some enhancement to the main scheme or there is an employer incentive.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
So if your employer scheme allows you to take cash from your avc fund rather than reduce your main pension would this be a good reason to pay into an avc?0
-
So if your employer scheme allows you to take cash from your avc fund rather than reduce your main pension would this be a good reason to pay into an avc?
Good question. Anyone ?Hi, we’ve had to remove your signature. If you’re not sure why please read the forum rules or email the forum team if you’re still unsure - MSE ForumTeam0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 354.2K Banking & Borrowing
- 254.3K Reduce Debt & Boost Income
- 455.3K Spending & Discounts
- 247.2K Work, Benefits & Business
- 603.8K Mortgages, Homes & Bills
- 178.4K Life & Family
- 261.3K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.1K Discuss & Feedback
- 37.7K Read-Only Boards