Teacher AVC versus Mortgage overpayment

heldel00

So i have recently looked into restarting my AVC contributions. Haven't signed up to anything just yet. Still weighing up pros and cons.

In my mind the AVC is a very longterm savings account. Downside would be not having access to funds if needed before retirement. Upside is .... not having access to funds. No temptation there to dip into the savings.
A colleague advised that her husband is private sector, as is mine and they viewed this as his pension pot rather than paying into a separate private pension (his workplace does not offer a pension scheme). We are both 33 years old.

More advice i received was that we could be safer off overpaying our 800 a month (35 year AIB variable) mortgage by the amount intended for the AVC. Get rid of mortgage ASAP and worry about retirement plan at a later stage.
I should also add that i do have quite a good saving record but moreso for the usuals - holidays, car tax, insurance etc ....

I have probably left out a lot of necessary information but any advice people may have is welcome.

testicles

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endacl

You've an affordable mortgage. The earlier you start retirement planning, the better.

That's all I got.

ANXIOUS

testicles wrote: »

This post has been deleted.

No you can't. Completely wrong, you should never look for personal financial advice on a public forum.

heldel00

ANXIOUS wrote: »

No you can't. Completely wrong, you should never look for personal financial advice on a public forum.

You will see from my opening post that I am weighing up the pros and cons. I am obviously not going to dive headfirst into a decision based on the advice of strangers but opinions are welcome - yours included!

ANXIOUS

heldel00 wrote: »

You will see from my opening post that I am weighing up the pros and cons. I am obviously not going to dive headfirst into a decision based on the advice of strangers but opinions are welcome - yours included!

Few things you could look at, can you fix your mortgage so you have certainty over how much it will cost?

What would you expect the AVC to return on a yearly basis?

Can your partner set up a personal pension or a prsa?

Avatar MIA

What interest are you paying on your mortgage? What growth is your AVC attracting. Factor in the tax relief and you should have enough info to make a decision (based on current info).

Prenderb

. A lot of this is tied in to your own personal situation as regards the contract you're on and the existing pension/superannuation arrangement depending on when you started and if you intend to stay in the job.

FWIW AVCs. As I see 'em -

Pros - easy to do, great potential tax benefits, good potential returns, earlier you start the better the compound interest effect.

Cons - money locked away for years (till you're 65), withdrawals taxed as income, value of your investment may fall, value of investment eroded by possibly significant fund fees (1-2% adds up if growth is 3-4%, and fees are charged even when funds value falls). Like pringles, though, once you pop, it's hard to stop investing in the AVC because as far as I'm aware, the money is locked in.

Mortgage payments

Pro - clear debt quicker, it's (depending on lender and your arrangement, voluntary month by month so you can stop doing it much easier.

Cons - reduced disposable income.

Do get investment advice. If you want to be sure it's impartial, pay for it. Free advice is rarely free.

Avatar MIA

Prenderb wrote: »

Free advice is rarely free.

Is that advice free?

damemcd

Money isnt locked away till youre 65, you can access it atyour retirement date, which may be before youre 65