Pension Alternative

[Mr Angry from Purley]

Can any of you Nigels out there offer me any advice on a better way to invest my money than a AVC into my pension. My Company investment is 5%
and its not a final salary scheme

I've been told that premium bonds is an outside bet?

[Spoonbill]

Mr angry - while the sharks are circling and devising ways to relieve you of your hard earned cash, don't forget the benefits you get from putting money into a company (not private)pension which you don't get from the large majority of other investments:
1 - Tax relief on your and your employers contributions.
2 - Greater legal protection in the event of the investor running off with your cash.
3 - Free lump sumps for death in and after service.
4 - Index linking if you're lucky.
5 - The right to become a trustee, and the right to vote at any time (subject to support), to vote against the trustees if you're not happy with the fund performance.

There are probably many others, and I'm no expert, but unless you really know what you're doing and can keep tabs on the investment 24/7/52,
I'd stick with a pension fund. <img src="cool.gif" border="0">

[willoman]

Your pension and AVC payments are entirely different. Your employer pays 5% into your pension scheme. He pays nothing into your AVC scheme - that is done only by you which is why it is called Voluntary Contributions.
However, you do get tax relief on AVC contributions at your highest tax rate e.g. if your tax rate is 40%, then for every £1 you put in, the govt give you 40 pence of it. It is doubtful if you will find a better investment anywhere than that!!

[ 14 January 2002: Message edited by: willoman ]</p>

[Sick]

well for every £1 you put in, the govt don't take out 40p. Lets not give credit where it's not due, especially to the blood sucking tax-man.

[dumiel]

I have been led to believe that with AVC's you must purchase an annuity and that no part can be paid lump sum. with the recent record of annuities I have recently been advised to steer clear however this decision was also based on my age so it is advisable to get proffessional advise. If you have a lump sum of 20k to invest at present I do suggest that you invest them in premium bonds, at present low interest rates do not promote savings as such and bonds and shares in general are not performing well. <img src="confused.gif" border="0">

[willoman]

sick - you are splitting hairs. True that the Govt don't 'give' it to you but if it does not go into an AVC, they sure as hell will take it!

dumiel - The AVC money can be used to purchase further pension from your main pension scheme and then you can cash in up to 150% of your last years salary from your pension as a tax free lump sum - better than the equivalent of AVC money used to purchase an annuity. The concept of using a large lump sum on Premium Bonds is the height of stupidity !

[Invalid Delete]

Willowman : I have some friends who, 3 months ago invested 10k in premium bonds and in fact they have received a better return from the bonds than they did from the bank ! Strangely enough - on average premium bonds seem to be a fairly good bet at the moment - better than the banks anyway. Don't bank on getting the jackpot though <img src="wink.gif" border="0">

That said you do "appear" to get more tax relief from AVC's into a pension scheme. The question that we all have to ask ourselves now is :- With people living longer, and becomming more of a drain whilst they 'persistantly continue to live longer' (tongue in cheek) <img src="wink.gif" border="0"> the returns from a pension scheeme at retirement may not be all they seem at the moment perhaps ? - Who knows ! Certainly not me, not for sure anyway !

What I find out of order with pensions (my understanding anyway) is this : After being on a pension and subsequently leaving this earth, the remaining funds return to the pension company to pay off some fat-cat or increase the pension companies profit. I think that the remaining funds should go to the surviving relatives. Which brings me quite neatly onto my next suggestion....

Why not invest in bricks and mortar ? If you take out a mortgage on a place, get a lodger in to cover the mortgage payments (or there abouts) you will have an investment that will certainly be index linked and when you retire you could either :-

A) Live off the rent money in your retirement. Die and pass on the house to your relatives.
B) Sell the place, bank the money and live off the interest. Die and pass on the money in the bank to your relatives.
C) Move into it, sell your main house, which is probably bigger, bank the money and live off the interest. Die and pass on the money in the bank to your relatives.

...Or variations on the above. The long and the short of it is that if you go down this route you actually have an asset which belongs to you rather than one that doesn't.

Pension companies can go bust - but I've never seen a house that did :)

IMHO I'd recommend a combination of investments.

Unfortunately, BWA who I worked for have ceased trading and left me well and truly up the creek, so I would highly reccommend the mortgage protection insurance, even though it takes 3 months to kick in (by which time you have another job, anyway.)

Hope this gives you food for thought...

And if it does can I have a 737 job ?

[cwatters]

Normally the best advice seems to be to save as
much as possible in an AVC scheme and then look
elsewhere for tax breakes...Possibly an ISA?

With a pension/AVC your contributions are made
before tax (eg you save tax now) but you will
probably pay tax on your final pension income.

With an ISA you make contributions out of taxed
income (eg save no tax now) but you may be able
to get tax free income in retirement (for example
by regularly cashing in investmants that have grown tax free).

[Floppy Link]

Read

"Rich Dad Poor Dad" by Robert Kiyosaki and Sharon Lechter, it was only $15 in the states, try amazon or the like, good book, good ideas