To AVC or not to AVC ?

elephant_guy

I am fortunate enough to be in a final salary scheme and am due to retire in nine years time. I am a higher rate tax payer and have been paying AVC's direct from my pay for the past ten years or so. The AVC fund is with Standard Life who give a discounted management fee rate to my AVC scheme. My current contribution is £200 per month.

I am confused as to whether I should continue paying into the in house AVC scheme or whether I should start a further seperate pension.

Having contacted my pensions department they have told me that the pension trustees have agreed that the AVC need not be cashed in when my occupational pension is realised in nine years time and that I can decide myself when to take the AVC as a pension at any time up until the age of 75. The only restriction appears to be that I will not be able to make further payments into the in house AVC after I retire.

My current thoughts are that I should just continue paying into the AVC.

Am I missing something ? Are there any better options for me ?

dunstonh

AVCs can be a pain in the neck when it comes to retirement planning. Especially for those looking for early retirement or phased retirement.

You are paying £200 a month and have mentioned standard life but you havent mentioned anything about the investment. Yet that is the most important thing when you are investing. Effectively, its like saying I have a car, is it any good without telling us what the car is and what you need it for.


Are there better options for you? Maybe, maybe not. Are you looking for early retirement? Do you care how the money is invested and if it makes you anything? Do you care how much tax you pay now or in the future? Do you care about how the maturity/income is paid to you? Are the investment options within the AVC suitable for you? Has a tax free lump sum option been added by the trustees?

elephant_guy

Thanks for the reply... I have the fund equally split between Fidelity Special Sits, SL Overseas Manager of Managers and SL UK Manager of Managers funds within the Standard Life AVC. The current fund value is around £35K. I want to take a medium to higher risk approach until a year of so before retirement and make a decision then as to whether I should take the AVC with my Occupational scheme or whether to let it continue running after I retire.

The trustees state that I can take 25% of the AVC fund as a lump sum.

I want to take the lump sum and buy an annuity when the AVC fund attains a reasonable size (£100K ish).

EdInvestor

This particular AVC arrangment would appear to tick all the flexibility and fund offering boxes which would normally suggest people look elsewhere

Just one thing:

The AVC fund is with Standard Life who give a discounted management fee rate to my AVC scheme

What rate exactly?And are you paying extra for the external funds?

elephant_guy

Ed...

Apologies for the delay, had to get the precise figures from my scheme administrators.

Here are the management charges obtained from Standard Life...

UK Equity Manager of Managers 1.2%

Overseas Manager of Managers 1.2%

Fidelity Special Situations 1.8%

elephant_guy

Ed...

Apologies for the delay, had to get the precise figures from my scheme administrators.

Here are the management charges obtained from Standard Life...

UK Equity Manager of Managers 1.2%

Overseas Manager of Managers 1.2%

Fidelity Special Situations 1.8%

Does anyone know whether these are reasonable managements charges. The first two funds belong to Standard Life and as I understand it are externally managed.