Recommendations for good pension advisors

Is it common that employees in DC schemes are allowed to increase their contribution rate above the normal contribution rate?

What I mean is as follows:
  • employer pays 5% and employee must pay 5%
  • Employee wants to contribute more than 5%, say 12% in total
  • Is that always allowed?

So the extra 7% is called an AVC? Okay.

I'm more used to the PS, where AVC refers to something different.
 
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Protocol said:
Is it common that employees in DC schemes are allowed to increase their contribution rate above the normal contribtion rate?

What I mean is as follows:
  • employer pays 5% and employee must pay 5%
  • Employee wants to contribute more, say 12% in total
  • Is that always allowed?

So the extra 7% is called an AVC? Okay.

I'm more used to the PS, where AVC refers to something different.
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Yes, it’s very common.
 
The way it's worded in our payrol/pension docs, they refer to an AVC as any contribution that the employee makes, not just the amount over and above what the company is contributing. In our workplace, you get automatically enrolled in the pension scheme and the company will contribute a certain percentage based on age and years service, irregardless of what the employee contributes. The employee can choose not to contribute anything at all.

This is slightly different to some companies I know of anecdotally. A lot of companies will do a strict match, they will match whatever the employee contributes, up to a certain threshold (8% is quite common from what I've seen). The employee can make addtional contributions on top of that and I think the use of the term "AVC" is most commonly associated with this scenario.
 
From personal experience in a DC scheme.
As there’s more options available for AVC’s when taking benefits, my employer, instead of attributing my 8% contribution as employee contribution it was designated 5% employee contribution and 3% AVC.
 
Protocol said:
Okay.

There is a question of terminology here.

An AVC typically refers to a wholly separate pension policy started between an employee and a firm like Zurich, etc., as an add-on policy, with a separate fund, separate to the main pension scheme.

For example teachers, nurses, etc. starting an AVC policy with Zurich or New Ireland to enhance their work DB pension.


Personally, I would not call increased employee contributions to your main scheme as an AVC.

Maybe I'm wrong.
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You're wrong. An AVC is any contribution paid by the employees that is not required by the scheme rules. It's voluntary, and in addition to the required employee contribution (if any).
 
Thanks for the information and knowledge sharing folks. I know a lot more now than I did 2 days ago. I think as a start I’m just going to focus on the low hanging fruit, doing everything I can to max out my contributions while availing of the generous contributions my employer is making also. I’ve got a query in with them about fees as well, just to get a feel for what that might be. I’m leaving my risk profile on a medium setting for now, I’m conscious that I have a lot of catch-up to do, but don’t want to be reckless either.

If I need more nuanced advice I’ll probably approach a professional at that point.
 
I think that some of the confusion in this thread between AVCs and ordinary employee contributions to an Occupational Pension Scheme arises from a time when AVCs and ordinary contributions offered different options at retirement. An employee (not a director) could avail of an ARF in respect of AVC funds but not ordinary employee contributions. For this reason it was important to distinguish between the two. Some schemes went as far as having no ordinary employee contributions so that all employee contributions could be designated as AVCs.

In 2011 the rules were changed so that AVCs and ordinary employee contributions could all avail of the ARF options, regardless of whether the contributions were ordinary employee contributions or AVCs.

Regards,

Liam
www.FergA.com
 
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LDFerguson said:
I think that some of the confusion in this thread between AVCs and ordinary employee contributions to an Occupational Pension Scheme arises from a time when AVCs and ordinary contributions offered different options at retirement. An employee (not a director) could avail of an ARF in respect of AVC funds but not ordinary employee contributions. For this reason it was important to distinguish between the two. Some schemes went as far as having no ordinary employee contributions so that all employee contributions could be designated as AVCs.

In 2011 the rules were changed so that AVCs and ordinary employee contributions could all avail of the ARF options. Since then it makes no difference what you call employee contributions to an Occupational Pension Scheme.

Regards,

Liam
www.FergA.com
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The only caveat I’d add to that Liam would be in relation to the 30% drawdown option that was introduced briefly in 2013/2014.

People were allowed to withdraw some of their AVCs.
 
Gordon Gekko said:
The only caveat I’d add to that Liam would be in relation to the 30% drawdown option that was introduced briefly in 2013/2014.

People were allowed to withdraw some of their AVCs.
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Thanks Gordon. I'll change my final sentence to something a bit less sweeping.
 
LDFerguson said:
I think that some of the confusion in this thread between AVCs and ordinary employee contributions to an Occupational Pension Scheme arises from a time when AVCs and ordinary contributions offered different options at retirement. An employee (not a director) could avail of an ARF in respect of AVC funds but not ordinary employee contributions. For this reason it was important to distinguish between the two. Some schemes went as far as having no ordinary employee contributions so that all employee contributions could be designated as AVCs.

In 2011 the rules were changed so that AVCs and ordinary employee contributions could all avail of the ARF options. These days it makes no difference what you call employee contributions to an Occupational Pension Scheme.

Regards,

Liam
www.FergA.com
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My understanding was that a DC member who chooses salary and service for TFLS must buy an annuity but can still have the option to use any residual AVC fund to purchase an ARF ?
Thus giving the option to use more than one benefit option attached to the same employment.
I may be off the mark as I don’t work in financial services.
 
You are right, Deauville. Genuinely very surprised that a financial adviser didn't know this.
 
Deauville said:
My understanding was that a DC member who chooses salary and service for TFLS must buy an annuity but can still have the option to use any residual AVC fund to purchase an ARF ?
Thus giving the option to use more than one benefit option attached to the same employment.
I may be off the mark as I don’t work in financial services.
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Thanks Deauville. I was posting in reply to some of the earlier posts in this thread which seemed to be confusing AVCs and ordinary employee contributions. Do AVCs automatically need to be with a different company or have different fund choices to the main scheme? No. Can you increase your ordinary contribution to a DC scheme without it being an AVC? Yes. Your point about someone who chooses to use salary and service to calculate their TFLS instead of 25% of fund is of course correct and I've edited my post.
 
LDFerguson said:
Thanks Deauville. I was posting in reply to some of the earlier posts in this thread which seemed to be confusing AVCs and ordinary employee contributions. Do AVCs automatically need to be with a different company or have different fund choices to the main scheme? No. Can you increase your ordinary contribution to a DC scheme without it being an AVC? Yes. Your point about someone who chooses to use salary and service to calculate their TFLS instead of 25% of fund is of course correct and I've edited my post.
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Liam,
There’s an ocean of information out there and you manage to condense it down to relevant , understandable bites.
Thank you for doing so.
 
LDFerguson said:
I think that some of the confusion in this thread between AVCs and ordinary employee contributions to an Occupational Pension Scheme arises from a time when AVCs and ordinary contributions offered different options at retirement. An employee (not a director) could avail of an ARF in respect of AVC funds but not ordinary employee contributions. For this reason it was important to distinguish between the two. Some schemes went as far as having no ordinary employee contributions so that all employee contributions could be designated as AVCs.

In 2011 the rules were changed so that AVCs and ordinary employee contributions could all avail of the ARF options, regardless of whether the contributions were ordinary employee contributions or AVCs.

Regards,

Liam
www.FergA.com
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If one was to chose a lump sum based on salary and service, only AVCs could then be ARFable so the distinction is still important.
 
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