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Pensions - APC vs AVC

(4 Posts)
FoolandFitz Thu 11-Aug-16 15:00:36

I'm with a local authority pension fund and I want to make additional contributions to the pension pot. I have a choice between Additional Pension Contributions (APC) and Additional Voluntary Contributions (AVC). The AVC would be through a company like Prudential while the APC is within the pension pot. Whilst I know how AVCs work, I can't get my head around the APC and I can't get a handle on which is right for me. Can anyone explain what the benefits/drawbacks of APC are as compared to AVC?

I am in my 40s and have had a very sporadic work life and no contributions in a pension scheme to speak of. I am not sure how long I will stay in this job either, given cuts in the public sector.

Sunseed Thu 11-Aug-16 18:16:41

ASC will entitle you to a more generous final salary pension benefit as you will be buying added increments. Benefits to you of this will depend on whether you need security of income in retirement and a spouse's or dependant's pension when you die. Also, Company bears all the investment risk. As it's a public sector scheme you don't enjoy the full pension freedoms introduced last year.

With AVC you bear all the investment risk. But death benefits are lump sum return of fund so better in many cases, especially if you have no spouse or dependants. And you have pension freedoms e.g. to take out lump sums or to not be obliged to buy an annuity.

Ask for illustrations for both schemes to help you see which you might be better off with.

Laska5772 Thu 11-Aug-16 18:56:24

you can choose your level of investment risk on AVCs also is very tax efficient , you can take it allout as a lump sum tax free at the end.. I've been doing it for the last 10 years , and now put in about one third of my salary..(but I dont have mortgage or kids at home any more ). Its going to buy our motorhome for when we retire

FoolandFitz Sat 13-Aug-16 18:21:54

Thank you laska and sunseed for explaining it to me. Motorhome sounds good.

Can I do both? Start off by putting in the maximum allowed in ASC and then start doing AVC?

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