Should I start putting my savings into AVC's or in long term investments

K

Kildare2019

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Myself and my husband are both civil servants in our late thirties and through a lot of hard work we are now mortgage free.
We were thinking of buying a second property as a long term investment but after doing a lot of research it is not an option we would be interested in.
Our monthly mortgage payment was about 900e and we are wondering whether to put that sum of money into AVC's or into a long term fund/shares investment.

Any advice would be greatly appreciated.
 
Remember, AVCs are long term shares investment. The difference it that you get the tax back now, and you can't take the money out until you retire. Otherwise, it is the same money going into the same (or similar) funds, buying the same shares.

In my case, since I'm 53, the term of the AVCs (i.e. retirement) was pretty much the same as my desired time frame for any other investment vehicle. Your age profile might be different.
 
Thanks for getting back to me, yes we are happy to leave it until we retire so AVC's seem to be the best option at the moment.
 
I'd suggest holding off until some of the more financially learned posters chime in (eg SBarrett). I am not in the financial game, so don't rely on my information alone. Also, have a search through the site for posts on AVCs. There is quite a bit of information.

In my case, I just diverted savings I was already making into AVCs. I also paid a lump sum for last years AVCs, up to the maximum. This can be done up to October this year. it cost me 10,000 to invest 17,000 in an AVC fund (organised through my employment).

Your work should have an approved AVC scheme (as you're civil servants).
 
If you are both Civil Servants (and presumably in the “old” Defined Benefit Pension Scheme), then you may not have significant scope to invest AVCs. One can only invest AVCs if the expected benefits at your Normal Retirement Age will be less than the Revenue maximum benefits. If you are going to have 40 years service by retirement age, then your current benefit projection will be close to the maximum (ie a Pension of 50% of Salary plus a lump sum of 150% of Salary). If so, the scope for investing AVCs will be very limited.
The only scope in the above case would be:
- if you have non-pensionable earnings
- or you want to increase the potential Widows Pension (payable on your death in retirement) from the scheme 50% of your Pension to 100% of your Pension (but perhaps unnecessary if you spouse is getting a Pension in their own right).

The main scope for AVCs tends to be where you have “short service” and thus will not be eligible to get the maximum benefits on retirement.
It is important to remember that you can only invest AVCs if the main scheme benefits are less than the maximum allowed under Revenue rules. If you are getting max benefits or close to, then there may be very limited scope for investing AVCs.
 
Thanks very much for all the replies, I have taken it all on board. I will contact Cornmarket and see what is the best option for me regarding AVC's.
 
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