Putting extra into the pension

[NuckyThompson]

Looking for some advice on whether to start lumping into my pension via AVCs now?

I’m 34, higher rate tax payer but could probably live quite comfortably on the threshold of the higher rate band. I’m on a final salary pension and have been for 10 years, I don’t really see my job lasting or at the very least this pension scheme until I’m in my 50’s nor do I particularly want to work into my 50’s anyway. My best guess is that il have 20 years in this pension by the time I’m either thinking of quitting or I’ve been made redundant.

My partner is on a good wage and we have investments so we’re hopefully pretty well set on an income until I would need to start drawing the pension in my 60’s,

The only alternative with the money would be overpaying on the mortgage, but I’m assuming the tax break of paying into the pension supersedes the interest payment savings on the mortgage?

[NorthDave]

I'm a bit confused how you can be on a final salary pension yet still be talking about contributing more? Do you have a second pension?

My only thoughts would be that if you put it in the pension it is tied up for a long time - I think you would be 58 before you could touch it. If you pay off the mortgage (or invest privately) then you have more options which might be important, given you dont seem that committed to working until you are retirement age!

[Welshbeef]

I had the options of AVCs whilst having a final salary - basically it was a separate pension and not matched by the company but clearly tax deductible.

[Mazinbrum]

I had an AVC alongside a FS pension, the scheme allowed you to combine them to increase the 25% tax free lump sum available and therefore the pension received would have been higher or less reduced (had I not transferred it out).

[NickCQ]

It's worth figuring out whether you are likely to hit the pension lifetime allowance (LTA) before your target retirement age. If that's the case (and it's possible with a final salary scheme for a higher earner), then putting more cash in your pension is likely a bad idea as you'll trigger more LTA payments.

[mike9009]

From a pure long term financial perspective, the pension is the best option.

However circumstances change, your health might be impacted, kids, care for a relative, etc might necessitate different financial priorities. A pension is not so flexible. So I have taken the following 'balanced' approach to any extra monies I have.

Third into pension
Third into mortgage
Third on fun stuff

Mike

[NuckyThompson]

Mazinbrum said:

I had an AVC alongside a FS pension, the scheme allowed you to combine them to increase the 25% tax free lump sum available and therefore the pension received would have been higher or less reduced (had I not transferred it out).

Yes this is what i've got basically. I think the general idea is to have 25% (max) of your pot be AVC's. So theoretically i need to check how far off that I am (i've only been doing £100 a month atm though so im probable nowhere near the 25%)

For context My partner will likely overtake me in earnings in the next few years, I have investments which should mean my share of the mortgage will be cleared next year. If i was to be made redundant I would work part time for my partner (£20k-ish a year)

We have the business plus investments then which would take us from our mid 40's to our 60's when pensions would kick in. So my thinking is we can afford for me to max into my pension as although this is tied up money we don't/won't need to access it until our 60's when it will either top up our investments or take over from them.

[Roaringopenfire]

I recomend you understand what portion of the LTV will be taken by your final salary pension then you will know what gap you have to fill. I'm not an expert at all but my final salary accounted for more of the LTV than I assumed and thus when I added in my personal pension it took me over the LTV.