Pensions

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4. How to top up your company pension

If you are in a typical company scheme that requires a contribution of about 5 per cent, it's a good idea to pay additional contributions to top up your retirement income.

Why? Because unless you work for the same company for 40 years, you will not achieve the maximum permitted pension of two-thirds of your salary at retirement.

The three tax-efficient products usually recommended for top-ups are additional voluntary contributions (AVCs), free standing AVCs (FSAVCs) and individual savings accounts (ISAs).

• AVCs are group pension arrangements linked to the company scheme. The scheme trustees usually appoint a financial institution to handle the investment - typically a life office, building society or unit trust group.
• FSAVCs are individual pension plans which you can buy direct from the provider. As AVCs are a group arrangement this option will generally be a lot cheaper than individual plans but FSAVCs may offer a better investment choice.
• ISAs are not linked to your pension in any way but are suitable for long term retirement savings and are sold by a wide range of financial institutions.

It is important to remember that ISAs and AVCs/FSAVCs are not mutually exclusive.

If you can afford it you should consider paying into both in order to get the most out of your annual tax allowances and to improve the flexibility of your retirement savings.

1. Don't rely on the state scheme! 2. Private pensions: your most tax efficient investment 3. Company pension schemes 4. How to top up your company pension 5. Factors when topping up a company pension 6. What if you change jobs? 7. SSASs for small companies 8. Personal pensions 9. Value for money personal pensions 10. Aim for a balanced pension portfolio 11. How much can you invest in a personal plan? 12. Choosing a fund 13. Personal pensions with greater investment scope 14. Use your plan to get out of S2P 15. Do you need an adviser? 16. Conclusion

• Pension Power