AVCs

Frank_Monaghan

Hi,

I'm new to the Forum so please forgive me if this has already been raised.

I'm a 49 year old university lecturer and have been paying AVCs as part of the Pru's scheme to the maximum allowed (9%, or about £250 a month) for about 7 years. I've been told by friends that I'm wasting my money. Anyone have any concrete advice? I see from a previous posting that I should look into buying additional years, so will look into that,

Frank

dunstonh

You are not wasting your money as such. You are getting tax relief on the premium and Pru are a good provider. Even their with profits plan is not too bad. Pru have generally made their legacy plans low charge. Usually on par with 1% annual management charge. The teachers in house AVC may be even better.

If added years is available to you, then that is usually the best method. However, it is also the most expensive. Like for like though, added years can provide the most benefits.

Because of stakeholder pensions, AVCs have been in decline. From next year, the AVC can have a tax free lump sum taken from it which basically turns it in to a personal pension as far as benefits are concerned.

If you are looking for early retirement, in house AVCs may not be suitable as they are linked to the occ scheme and cannot be taken before the occ scheme (unless link is broken). If the occ scheme trustees do not allow early retirement, you cannot take the AVC benefits. You could with an FSAVC or personal/stakeholder pension or ISA. Added years would not be suitable for early retirement in those circumstances either.

So, you havent wasted your money but you may be able to improve it.