Paying Into An Avc - Help Needed

[minnie76]

i’ve been offer the use of two AVC providers, these are Clerical Medical and Standard Life.  I have read all their relevant info but it still doesn’t help me with which is best and what would option would be the best. i’d like to pay 200£ each month? any advice would be much appreciated

[newmodarmy]

You can look at their charges but they'll probably be similar.

It also depends on performance but they'll both have to use the same assumptions in their illustrations. You could look at past investment performance but that's not always a good guide to future performance.

You also need to look at things like flexibility if you want to change your contributions, and what options they offer if you want to draw on your pension.

You could also look at the funds they invest in- are they ecologically sound, how safe/risky are their available funds options?

Maybe put £100 in each if you're not sure- or toss a coin.

[Hymie]

I wouldn’t bother with AVCs; company pensions are only worthwhile because your employer is paying into the pension pot (normally more than you), but not so with AVCs.

 

Some might point out that the AVC savings are tax efficient; for every £100 you paid in you only have ~£83 deduced from your salary (if a base rate tax payer).  However when you come to take the money out you will almost certainly pay 20% tax – wiping out most of the tax benefits.

 

Better to find some personal tax efficient savings scheme; that way you have total control over the money saved, and will not be paying someone 1% (or more) of your total savings each year for doing nothing.

[newmodarmy]

I largely agree with Hymie, although I would still go for AVCs if you were a higher rate tax payer, if you were retiring in the next few years so could take advantageof the tax free lump sum element, or if you really need the discipline of regular saving taken directly in order to stop you being tempted to fritter the money away.

[ToraToraTora]

AVCs are very tax efficient especially if you are on higher rate tax. eg to save £1000 actually reduces take home by just over £600. When you start to take an income for that money you can end up payeing the tax back but just be tax efficient, eg never exceed the higher rate band then you'll only pay 20% on what you put in rather than 40%.  The provider doesn't really matter, it's the fund you choose that is more important.

[Peter Pedant]

I dont think the advice on this thread is much good.

Fist of all you have t predict which is better over the next twenty years - I dont think we can...

Hymie is wrong on NOT investing... I have an FSAVC to augment my pension, and it was tied to my employer. Not bad. I havent vested it.

The problem with someone being very good is they may not be good tomorrow ( woodford, jupiter). I have opened a few standard life stakeholders for my relations - which arent doing too badly, but that is another story

[newmodarmy]

Well thank you Peter for clearing up matters with your good advice.