Saving AVCs or stocks and shares?

bluebottle11 · 17 October 2019 at 7:50PM

I have a self select stocks and shares ISA invested in about 15 stocks., a mix of individual companies, trackers and managed funds.
I have a couple of questions - I no longer have the time to research adequately which stocks to invest in, would it be a good idea transferring my current holdings, some of which can be volatile to something like the Vanguard Life Strategy 80% fund, one I can invest and forget about.
I also have a company pension, that has done quite well, and was wondering if it is worthwhile buying AVCs, given in a way you get a 20% head start as the money is taken before tax.
I am 47,no mortgage or debt and would love to semi-retire at 55.
Any advice appreciated.

MaxiRobriguez · 17 October 2019 at 8:49PM

If you no longer have the time to research individual shares then yes rolling them into one global index tracker or a VLS type fund would be sensible. Many would argue it would be sensible to do that anyway.

Self sacrificing pension will give you a 32% boost as a basic rate taxpayer as it avoids NI too. You can still invest in index funds from within the pension wrapper, so if anything you should redirect be redirecting any outstanding cash injections into such vehicles.

If you do manage to semi-retire at 55 you may want to consider how you drawdown the money, which may involve a smaller equity allocation and/or maintaining a consistent amount of £.

cloud_dog · 17 October 2019 at 9:07PM

MaxiRobriguez wrote: »

If you no longer have the time to research individual shares then yes rolling them into one global index tracker or a VLS type fund would be sensible. Many would argue it would be sensible to do that anyway.

Self sacrificing pension will give you a 32% boost as a basic rate taxpayer as it avoids NI too. You can still invest in index funds from within the pension wrapper, so if anything you should redirect be redirecting any outstanding cash injections into such vehicles.

If you do manage to semi-retire at 55 you may want to consider how you drawdown the money, which may involve a smaller equity allocation and/or maintaining a consistent amount of £.

You need to check what the AVC provider offers and charges.

MaxiRobriguez · 17 October 2019 at 9:20PM

Indeed. Sorry, earlier post made it sound specifically like definitely do the AVCs, but it was meant to be more along the lines of 'find a pension vehicle that is appropriate to you'.

bluebottle11 · 17 October 2019 at 9:40PM

Thanks for the replies.
My current pension is invested in a diversified investment trust fund and an emerging markets fund, and I planned to invest the AVCs in the same funds.
I am debating whether to put my spare money each month into the AVCs or the S&S ISA. I did think it would be best in the AVCs due to the tax and NI savings, although I know there are tax implications when I come to draw down my pension.
I didn't know if there was anything I was missing as it seems a no-brainer to save in the AVCs and as everyone says shares are for the long term, why doesn't everyone buy AVCs?

AnotherJoe · 17 October 2019 at 9:47PM

bluebottle11 wrote: »

Thanks for the replies.
My current pension is invested in a diversified investment trust fund and an emerging markets fund, and I planned to invest the AVCs in the same funds.
I am debating whether to put my spare money each month into the AVCs or the S&S ISA. I did think it would be best in the AVCs due to the tax and NI savings, although I know there are tax implications when I come to draw down my pension.
I didn't know if there was anything I was missing as it seems a no-brainer to save in the AVCs and as everyone says shares are for the long term, why doesn't everyone buy AVCs?

There's an equal indeed likely worse "tax implication" if you put it into a S&S ISA, in that you lose the NI relief plus you pay at least 6.25% more tax taking into account the 25% TFLS.
Also, depending on your sources of income, when you take the money out of a pension you may be able to pay much lower or even no tax on some at least of it whereas with an ISA its certain you've paid 20% tax plus ?12%? NI.

MaxiRobriguez · 17 October 2019 at 10:16PM

bluebottle11 wrote: »

why doesn't everyone buy AVCs?

Because a significant number of the population has no interest in investing or saving money.

bluebottle11 · 18 October 2019 at 9:23AM

I appreciate that not everyone has enough spare money each month to put in savings and some will need easy/quick access to their money. But even with MSEs advice on savings and investments I don't recall seeing anything that advised AVCs ahead of ISAs, so wasn't sure if I was missing something!

SonOf · 18 October 2019 at 10:37AM

I also have a company pension, that has done quite well, and was wondering if it is worthwhile buying AVCs, given in a way you get a 20% head start as the money is taken before tax.

AVCs are largely an obsolete product nowadays. Or perhaps niche would be a better term. Most companies no longer offer AVCs and those that do are often no longer on competitive terms. However, there is a small number that do have very good terms and a small number that allow you to divert the tax free cash from the main linked scheme to the AVC. That can be highly valuable. However, if your AVC is not one of those, then a different pension option would likely be better.

I don't recall seeing anything that advised AVCs ahead of ISAs, so wasn't sure if I was missing something!

AVCs being so niche, you won't find much on them. Most conversations take place on pension vs ISA, not a niche pension product vs ISA.

There is no 100% rule on which is best either. Although pension often nudges it.

Saving AVCs or stocks and shares?

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