Knowing I was likely to have an option to retire this summer I started an AVC in the final months of the last tax year using a small endowment that had matured (should have been a much larger endowment but that's another story) I continued paying into the AVC for the few months until I retired then took the whole lot with my lump sum within the 25% allowance. The effect was that for each £800 I put in I got £1000 back. My only regret is that I didn't put more in whilst I could.

I understand that the money paid into an AVC is 'tax free', the downside is that after the 25% lump sum is taken you then have to place the rest of the money into an annuity.  At present the average annual income that you can generate from an annuity is approx. £660 per £10,000 which is then taxed at your rate !

The real question is if I put aside £100 per week to save towards my pension should I go down the AVC route, invest in a stocks & shares ISA or put £50 in each ? 

I suppose a further method is to save into an ISA then in the final year before retirement place all the money into an AVC ?

 Any opinons would be appreciated.