Reduce pension AVCs?

[LeaveNoTrace]

First, a confession. I am a complete and utter money fool who arrived at age 60 with no almost no meaningful workplace pension.

Just over a year ago I suddenly panicked. My earnings are not great, but I decided to max out my DC workplace pension and also start making hefty AVCs. For the past 15 months I have been paying my entire salary into my pension via DC and AVCs while living off my other savings. This seemed like a sensible thing to do at the time to take advantage of tax relief and build up at least a few years of interest. Wrong. The value of my pension pot is now thousands less than I have paid in, and still dropping.

It looks like I chose the worst possible time, and now I feel as if I have been throwing my hard-earned cash over a cliff. Am I stupid to keep paying so much into AVCs? Am I really just throwing money away? Or is it in fact sensible to keep on doing so during the current slump, because when the fund rebounds (hopefully before I retire in three and a half years' time) I will end up with more money because I will have been buying cheap?

Apologies if this is a really basic question. I think maybe there are many people like me who just cannot grasp numbers, percentages etc. The more I try to educate myself the more it all turns to number soup in my brain.

That rather depends on when you plan to retire, as investments have dropped quite a bit recently. However, given time they will recover though who it's uncertain when that is likely to be. If you are paying AVCs via your employer, you are saving on tax (as they are deducted before tax), so quite a gain. Make sure the AVC funds you choose are 'cautious' as these are less volatile than more adventurous funds.

Incidentally, I did something similar before I retired. I had been contributing to AVCs over a few years but in the final five years I gradually increased them to over half my salary. I was really pleased I had done this when retirement came around, as it gave me a tax free lump sum (on top of my pension) as well as reducing my income tax.