Retire at 60?

[Rommagic]

Hi ,I am 38 years old and have done 22 years at Royal Mail,I would like t retire at 60.Lots of people tell me to get a AVC is it worth it before ?the new deal might come in.Also I don’t really understand them do you get tax relief ?and growth?.

[RobertT]

At the time of writing it hasn’t been confirmed yet whether AVC’s will continue past 1 April 2018. But under RM’s original Cash Balance plans, they would have done, so there’s a good chance that’s still the case, at least until the CDC scheme is introduced(pending legislation).

As you’re in Section C and as things stand today, you have the choice of two AVC’s:

Bonusplan – which benefits from extra contributions off RM, but you’re only allowed to put in a small amount each week.
Flexiplan – no extra money off RM, but you can put in as much as you want, up to certain limits.

Payments into AVC’s benefit from both tax relief and PSE in the same way as your regular pension payments do. So a £10 gross payment only actually costs you £6.80, with £2 being reduced from your income tax and £1.20 taken from your NIC’s. The money is then invested in your choice of fund/s from the ones available.

AVC’s are usually used to fund the tax free lump sum when taking your NRA60/65 benefits, so there’s no or less need to give up some pension to get that lump sum. Or they can be accessed independently of your main benefits if you want, but tax is more likely to be an issue.

The general rule of workplace pensions is always get as much off your employer as possible, so Bonusplan is a no brainer. Personally, I’ve been paying into mine for around 23 years I think, and my contributions(factoring in tax relief and PSE) only account for about 20% of its value. So it’s turned out to be a decent investment. Although the actual money involved isn’t a huge amount in itself, so I would suggest paying into Flexiplan aswell.

Alternatively there’s nothing stopping you from starting your own personal pension or SIPP independently of RM. You’ll still get the tax relief but no PSE and no additional contributions off RM.

There’s more info on RM AVC’s here

[maisymoo04]

I have been doing avc for the past 21 years bonus plan and flexi plan thanks for the advice Robert T