Teachers' AVC Funds and A Day

KMK

In "The Guardian" this morning it states that teachers in the Pru's AVC scheme are are being refused the benefits recommended for A Day. It blames the Teachers' Pension Scheme for resisting the new benefits and suggests that agreement will not be reached until summer 2007! This seems so unfair when the reforms are recommended by the Government and the TPA is a public scheme.Is the article in the paper accurate? I retired in August 2005 and wanted to take 25% of my AVC £40.000 fund as cash now and the rest as an annuity. If I went with a another provider would I get a better or swifter A Day deal?

ReportInvestor

I imagine that you, like most teachers, will have chosen to invest in the Prudential With Profits Fund.

The key question to find out is if transfers post retirement incur any penalty.

Will the Pru give you the same terminal bonus on transfer as if you converted your AVC pension policy into an annuity? Or put another way, can you exit with your full asset share?

If Prudential don't sort this out, there are likely to be one hell of a lot of transfers !

dunstonh

There may not be any transfers. I have yet to read anything that suggests that the link between occ scheme and AVC has been removed. So, if you are still a member of the occ scheme, you will not be able to transfer the AVC.

Of course, even now, little bits are still coming to light so who knows if this will change.

EdInvestor

I had heard that there was a proposal to allow people to transfer teachers' AVCs out independantly of the main scheme benefits.

This would enable you to move the AVC money out of the Pru to get the 25% tax free cash and the annuity ( or drawdown arrangement ) from the new provider.

I believe it requires a change to the regulations though.

Suggest you check with the union(s).

KMK

My F.A. and I looked at the possibility of moving my Pru AVC fund after A Day to another provider ,Canada Life, to access the cash and annuity but the difference was so small he thought it was not worth the move. He did not say that I had to stay with the Pru and seemed to suggest that I could go to any other provider without loss. Is this not the case? Getting a bit concerned now.

dunstonh

Under pre A day rules, if you were still a member of the occupational pension scheme to which the AVC or FSAVC were linked to, then you could not move them to another provider. As i mentioned above, I havent seen anything to say that this has changed. However, we are still getting new information every day.

With you mentioning Canada Life, it suggests your IFA is looking at the open market option/transfer for commencement of benefits rather than a transfer to alternative pension.

ReportInvestor

Pru will surely have to move on this if they are to retain their future teacher customers?

It's not as if a 1% charge on the AVC scheme has the attractions it once had.

KMK

Yes Dunstonoh, I should have explained it better. My FA and I were looking at the commencement of benefits from my AVC fund as I have put it off until A-Day, although I retired last August. I was naively looking forward to a nice lump sum this month! So can I move elsewhere to commence the benefits if the Pru drag their feet about implementing A-Day?

dunstonh

So can I move elsewhere to commence the benefits if the Pru drag their feet about implementing A-Day?

You should be able to. Your situation is that you have broken the link by retiring last August. The link applies to those still employed by the same employer and being an "active" member of the occ pension scheme.

I have a number of clients in the same situation as you and I guess most IFAs have as well. I sent, what felt like, a load of letters out requesting commencement options in March for people holding on for the 25%

EdInvestor

Observer reported yesterday that it will be allowed and a formal announcement is imminent.

dunstonh

That makes sense as a number of providers havent started offering the post A day product yet as they had to apply to get the product authorised after 6th April and not before.