Should I contribute my 2021 bonus to AVC or not?

R

rynos80

Registered User
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Age: 42
Spouse’s/Partner's age: N/A

Annual gross income from employment or profession: 79K with bonus
Annual gross income of spouse: N/A

Monthly take-home pay: 3700*. After all deductions i.e. pension and Health insurance

Type of employment: PAYE, private.
Spouse: nil

In general are you:
(a) spending more than you earn, or
(b) saving?
Saving.

Rough estimate of value of home: 280k bought in Nov 2019
Amount outstanding on your mortgage: Approx. 180k
What interest rate are you paying? Just moved to a variable rate @ 3.3%, 22 years plus. Mortgage repayment =950

Other borrowings – car loans/personal loans etc: n/a.

Do you pay off your full credit card balance each month? n/a
If not, what is the balance on your credit card? n/a

Savings and investments: 40K in deposits

Do you have a pension scheme? yes, defined contribution 7% employer contribution and pension pot 50K started late (2019).


Do you own any investment or other property? no

Ages of children: n/a

Life insurance: yes – 4 X Base salary for death benefit
Spouse: n/a

Question: I have a bonus due to be paid in April and I don’t to know, if I should contribute the full bonus to AVC or not? I’m worried my pension pot is very small..

My plan is to sell the apartment and upgrade to a house in 1-1.5 years’ time frame.

Looking forward to your helpful responses on the forum.

Thank you
 
Well, if you are planning to trade up within the next 18 months, you should probably keep the cash on hand.

But you’re right - your pension provision is poor for your age.

Are you sure you can really afford to trade up and provide a reasonable income for yourself in retirement?
 
Sarenco said:
Well, if you are planning to trade up within the next 18 months, you should probably keep the cash on hand.

But you’re right - your pension provision is poor for your age.

Are you sure you can really afford to trade up and provide a reasonable income for yourself in retirement?
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What is the benefit of keeping cash on hand to trade up?
 
There wasn’t any reference to investing in equities outside a pension unless I missed it ?

But it’s unclear if the op needs this cash available to trade up. If they do they should keep it on hand but I thought it was a reference to keeping a deposit to trade up on hand which is irrelevant as most people need to sell first anyway.
 
Blackrock1 said:
most people need to sell first anyway.
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I doubt that’s true.

Most people I know that have traded up bought their new home first and then sold their former PPR shortly thereafter. I’m sure it happens, but I don’t know anybody that sold, rented and then bought their new home.

Hence the benefit of having cash at hand.
 
Sarenco said:
I doubt that’s true.

Most people I know that have traded up bought their new home first and then sold their former PPR shortly thereafter. I’m sure it happens, but I don’t know anybody that sold, rented and then bought their new home.

Hence the benefit of having cash at hand.
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You must have some very wealthy friends then, i cant think of too many people that qualify for two mortgages under the current regulations, it may have happened in the past but it would be unusual now, hence most transactions are chains (dont need to sell, rent then buy obviously).
 
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