AVC's

aah

I have a very new pension arrangement with USS - I have been employed by an USS employer for 2 years and I am nearly 55. This is not, thank goodness, my only pension.

I have a fixed term contract ending 31.3.12. There is a 50% chance of this being renewed for a further 2 years.

I an a 40% taxpayer (only just) and would like to offset some of my income liable for tax at 40% by investing in an AVC. USS useds Prudential as a provider, so I called prudential today to ask some questions:

can I take the AVC benefits separately from the main beneifts (answer NO)

what interest is accruing on the AVC for current investors (anser (CANT SAY)

what are the charges (answer CURRENTLY BETWEEN 0.65 and 0.75%)

If I stop paying will interest still accrue (answer DONT KNOW THERE ISNT REALLY ANY INTEREST)

Will interest payable always cover the charges (answer NO)

Will my invested sum be guaranteed (answer NO)

And I thought Prudential were the goldstar - or should I say gold plated - AVC provider.

He did go on and on about my tax savings. But that is nothing to do with Prudential - it is government policy.

However I quite like the idea of long term investment - such as I can - until retirement age in 2021.

Are there any benefits in AVC's - other than the tax relief - and how dare the AVC companys eat into that?

A.

what is

jem16

aah wrote: »

I an a 40% taxpayer (only just) and would like to offset some of my income liable for tax at 40% by investing in an AVC. USS useds Prudential as a provider, so I called prudential today to ask some questions:

Why limit yourself to the AVC provider? All pensions will give you the same tax relief.

can I take the AVC benefits separately from the main beneifts (answer NO)

That seems to depend on the type of AVC you choose. Added years needs to be taken at the same time, money purchase does not.

what interest is accruing on the AVC for current investors (anser (CANT SAY)

AVCs don't earn interest. If it's Added years you are buying a number of years. If money purchase the value can go up and down.

If I stop paying will interest still accrue (answer DONT KNOW THERE ISNT REALLY ANY INTEREST)

That's correct. If Money Purchase AVCs the value will rise and fall.

Will interest payable always cover the charges (answer NO)

Will my invested sum be guaranteed (answer NO)

Both of these are correct but dependent on type of AVC.

And I thought Prudential were the goldstar - or should I say gold plated - AVC provider.

They are just a pension provider.

He did go on and on about my tax savings. But that is nothing to do with Prudential - it is government policy.

All pensions attract tax relief.

However I quite like the idea of long term investment - such as I can - until retirement age in 2021.

For 40% taxpayers nothing will better the pension provided you will not be a higher rate taxpayer in retirement.

Are there any benefits in AVC's - other than the tax relief

The benefits are mainly the tax relief. However AVCs have one major advantage and not all schemes provide this although it appears that Money Purchase USS AVCs do - the 25% tax free lump sum can be taken from your AVC fund so no need to commute from the main scheme which is usually poor value.

- and how dare the AVC companys eat into that?

Sorry i don't understand what you are trying to say here.

I think you really need to understand more about pensions and AVCs in general as you don't seem to have a grasp of pension funds. Perhaps read through this.

http://www.uss.co.uk/Factsheet%20List/Factsheet%2001%20v6.0.pdf

If you really need advice on whether AVCs or indeed another investment would be good for you then see an IFA - Prudential cannot give advice.

aah

Thanks for your help jem.

Does this mean i can invest in a separate money purchase pension scheme from my pension provider and take the money as a lump sum any time over 55, regardless of when i take my occupational pension...

dunstonh

Does this mean i can invest in a separate money purchase pension scheme from my pension provider and take the money as a lump sum any time over 55, regardless of when i take my occupational pension...

Yes within regulations (i.e. 25% tax free cash with the rest used to provide an income.

and how dare the AVC companys eat into that?

They dont eat into that. They have an annual charge and then in return give you the full benefit of the returns. How do you think they would make money if they didnt have those charges? They are not going to do it for love.

kidmugsy

"can I take the AVC benefits separately from the main benefits (answer NO)": really? It used to be allowed. I wonder when it changed, or whether the chap you spoke to is mistaken.

Be that as it may, there is no first order advantage to opening an AVC rather than a personal pension of one sort or another, and there is a first order disadvantage - you'd have less flexibility about when you took the money out.

jem16

kidmugsy wrote: »

Be that as it may, there is no first order advantage to opening an AVC rather than a personal pension of one sort or another,

Actually there is a big advantage. Copied from the link I provided earlier;

"Importantly, since 6 April 2006, your money purchase AVC fund can be taken as tax-free cash. You are allowed to take up to 25% of the capital value of your benefits under USS (including the USS money purchase AVC) as tax-free cash. Therefore if your money purchase AVC is less than 25% of the overall value of your USS benefits, you could opt to take your entire USS money purchase AVC fund as cash and take less cash from the main scheme, receiving a higher USS pension."

kidmugsy

Ah, good point, Jem.