early retirement and AVC options?

artha

I am currently 57 with a (currently) good company defined benefit scheme. For some years I've been paying into a Standard life AVC provided through the company AVC scheme. Retirement age is 62 and the AVC was designed to mature then. The AVC fund buys pension from the main fund

I,m now considering early retirement and looking athe options available for the AVC. Its not a great deal of money. At last valuation worth about 25K which will buy £1100 from the main fund if I go in the next 6 months. At least that is the theory as the actual value of the fund is only calculated after I have retired. As it is based on equities I'm concernrd that in the current climate i may get far less than anticipated after it is too late.

Can I leave the AVC to run (without further contributions of course) until such time as I decide to take it?
If I can leave it what are the pros and cons e.g I assume that It can only be used to purchase pension and can,t be included in tax free cash options at the time of early retirement?

jamesd

You'll need to ask the scheme administrators whether you can leave it.

You will have the option to transfer it to a personal pension and delay taking it that way. If your main defined contribution pension is ample for normal living this may be your best option for now, with a delay for at least two years likely to be needed to recover value. You would be able to take an income from this money during that time by using income drawdown, if desired, though unless your life expectancy is short that's probably not a good idea given current depressed values. You or your IFA should compare the benefit offered by the work scheme with the current and possible future values of either annuity or income drawdown from this money.

An external pension would have to sell the whole value of the AVCs to buy an annuity today. The main scheme wouldn't have to do that so it may offer a better deal than delaying or using a personal pension. You'll need to ask the scheme administrators to find out.

1,100 from a fund of 25,000 does not initially seem to be a particularly good deal. What benefits does it provide for a spouse and/or dependents and do you have either? Is it increasing with inflation, perhaps capped at some level? Either of those may make it a better deal than it initially seems.