Additional Voluntary Contributions (Pension)

NorthernSky

Veteran
i have a defined contribution (DC) pension
with savings completely worthless at the moment i'm considering sticking a few lump sum payments into my pension
has anyone done it?
bit of a risk i guess as i'll have no access to it until i'm 55 , also the investments could go up or down
but sticking money into my ISA with 0.05% rates is very disheartening

i guess the other thing would be to up my monthly percentage more. i did do this recently but could go further, and then at least i can bring that down again if need be 🤔
 

PK99

Legendary Member
Location
SW19
i have a defined contribution (DC) pension
with savings completely worthless at the moment i'm considering sticking a few lump sum payments into my pension
has anyone done it?
bit of a risk i guess as i'll have no access to it until i'm 55 , also the investments could go up or down
but sticking money into my ISA with 0.05% rates is very disheartening

i guess the other thing would be to up my monthly percentage more. i did do this recently but could go further, and then at least i can bring that down again if need be 🤔
If this is long term money (and given you are thinking pension, it sounds like it is, then have you considered a Stocks and Shares ISA.

There is a short term risk in any shares bases investment but a guaranteed decline in long term valy in a cash based investment while interest rates remain low,

All our money is now either : DB pensions paying out, Stakeholder rolling up, SIPP rolling up or Stocks and shares ISA.
 

vickster

Legendary Member
I've been sticking lots of money in a pension while I was self employed, very tax efficient...sensible to do unless you think you will need access to the money before you retire.
I'm now on an FTC with company pension and have doubled my contribution from 4% to 8% (employer pays 6% too). Might increase more when I see what my take home is
You could stick it in premium bonds (up to 50K), no risk, I've seen better than savings rates returns (tax free) and you can access very quickly.

I also have a Stocks and Shares ISA, doing well at ~10% growth after the last year but it does go up and down (one got absolutely hammered last spring when Covid kicked off), as above good for LT investing (and simple if go for a managed fund, there are different levels of risks)

There are some regular savings accounts that have a higher rate of interest for year 1, look at Coventry BS (I was sticking £500 in a month last year and getting 1.85%).

Obviously, if you have a mortgage, paying that off with lump sums is also sensible!
 

DCLane

Found in the Yorkshire hills ...
My suggestion is for you to get professional advice rather than a cycling forum, but ... my 2p-worth :okay:

I'm on a 13% contribution (employer 22%) final salary / career average teacher's pension scheme. I was contributing to AVC's for 5 years until I did the maths and realised the pension payment wouldn't even cover the contributions over a 30-year period, let alone inflation increase.

So, I've got myself an 'alternative' pension scheme that I've slowly collated - antique books, vintage Swiss watches and paintings.

We've also got a monthly savings amount going into savings as that picks up a higher interest rate than standard savings. No ISA's any more though and no shares.
 
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OP
NorthernSky

NorthernSky

Veteran
i'm at maximum employer contribution , checked into it but they won't give me any more :laugh:
yeah, i'm thinking of adding another 1% AVC for now.
stocks and share ISAs are a bit of a mine field so have avoided for now
 

vickster

Legendary Member
I use Vanguard for my S&S ISA, recommended to me, simple to set up, low fees.
How old are you?
Lucky to be able to retire at 55 :okay:
 

shep

Veteran
Location
Wolverhampton
As already said, and you already know, tax efficient and your 25% lump will also increase so it's worth it in my opinion. You got long to go?
 

cougie uk

Über Member
I would definitely consider monthly payments as they are tax efficient.

Lump sums not so much but you could always stick that in premium bonds and sell off to cover your 'expenditure' on the AVC ?

I've been lucky enough to be able to finish work before 55. Life is too short as it is.
 

Drago

Flouncing Nobber
Location
Poshshire
Slightly different for me as mine is a dibble pension, but the intent was the same. I had some spare pennies after my career break (6 months BG'ing abroad) and 'bought' 3 extra years.

In the normal scheme of things it would have meant I could retire 3 years early. In the event I got injured on duty and medically retired, but value of my pension and commutation were commensurately higher because of the extra years.

Point being, I can't see any circumstances where you might ultimately regret it over the long term. It might seem a ways off, but when it does finally come home to roost you'll be feeling mighty smug, a feeling that an ISA is very unlikely to bestow.
 

johnblack

Über Member
Yep I put in my maximum at which the company treble monthly. I then put in an extra lump in each month, plus I always stick my bonus in each year. Been doing it for a fair while so you can really see the difference, plus it brings down my tax. Then I'll bring that down further by taking another RTW scheme in a few months.
 
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