Mad to increase AVC's?

[johnd]

A friend of mine is in her late fifties and contributes 500 a month to an AVC. She could afford an extra 100 a month but is worried that in the present climate it will be a waste. She has only been working for the last 10 years so her pension will be small.

Many thanks

 

[Friday]

I reckon if she works until age 65 she will be able to take a tax free lump of circa 100% of her salary. Good idea if she focusses on this as the primary purpose of her AVC savings.The pension provided by her employers scheme can therefore remain intact at retirement without reduction to fund the retirement lump sum.

 

[STEINER]

I would go for it and avail of the tax relief at the higher rate, assuming tax is liable at the higher rate. While pension funds have suffered volatility, the tax relief should, at the very worst, offset any further short-term volatility.

 

[LDFerguson]

Remember that if she's averse to risk, she should able to invest in low-risk AVC funds, possibly cash funds which cannot fall in absolute value, although the rate of growth would be small. That way, she can avail of the tax relief without investing in a risky fund.