Mis sold AVC's

xylophone

I have just come across this: http://www.uss.co.uk/SchemeGuide/FinalSalaryBenefitssection/maximisingyourpension/Pages/default.aspx
"Pay into a Money Purchase AVC by regular or lump sum contributions. This is an investment-based facility but you have the choice of where your money is invested:
Pay a large proportion of your available earnings into this AVC (and still receive tax relief, assuming your payments are within the limits explained below)
You choose where the money is invested and therefore the level of risk
Option to take all the fund as tax-free cash at retirement (subject to an overall limit)
Option to buy a pension (called an annuity) with the fund, from Prudential, another provider or from USS when you retire (see the Prudential conversion tool).


Flexible so that you can reduce or have breaks in your contributions
If you want more information about the Prudential Money Purchase AVC give a call on:

Tel: 0800 515 914 (existing members call the customer call centre on 0845 600 0343)

Or complete a Money Purchase AVC information enquiry form which will arrive directly at prudential once completed and submitted.

If you get the opportunity at your institution take up the offer of a face-to-face meeting with a Prudential representative. Speak to your pensions contact to see if this is an option".

Is this the source of your confusion?

jem16

Poolgranny wrote: »

however I left that interview in 2008 reassured that I would be able to take my avc's back as a cash lump sum to do with as I wished. Not expected to buy an annuity or use it to increase my USS pension pot.

To be honest I think you have genuinely misunderstood what has been explained to you. You have just heard - you could take it all as a tax-free lump sum and not heard the rest.

The term AVCs is basically Additional voluntary Contributions - ie a way of increasing your pension by making voluntary contributions over and above what you already contribute. This is the reason you get tax relief added to your contributions. So for every £80 you contribute you will get £100 added to your pension. You would not get this if you saved in an ISA or any other savings account.

With the USS pension scheme you have the flexibility of using that whole AVC pot to take your tax-free lump sum. Most other schemes don't allow this.

So for example if your final pension entitlement ( including your AVC pot) was £15k pension and £45k lump sum, you would be able to take the whole £22.5k from the AVC pot and £22.5k from the main scheme.

If you didn't use the AVC pot you would have a pension of £13,125 and a lump sum of £39,375. You would then take 25% from the AVC pot giving you another lump sum of £5625 and an annuity with the remainder.

Whatever way you do it you only get £45k tax-free lump sum.

Poolgranny

jem16 wrote: »

To be honest I think you have genuinely misunderstood what has been explained to you. You have just heard - you could take it all as a tax-free lump sum and not heard the rest.

You may well be right. But surely even though they are not giving advice they have a duty of care to ensure you have understood what they have said. He was called a Retirement Education Consultant. Yes I am begining to understand the various options that I now have, but I feel they are not what I was led to believe or what I want.

dunstonh

But surely even though they are not giving advice they have a duty of care to ensure you have understood what they have said.

No. They have a duty of care to present the information accurately and answer questions factually. They are not responsible for you misunderstanding something that was said unless you asked them and they responded incorrectly.

Poolgranny

"Pay into a Money Purchase AVC by regular or lump sum contributions. This is an investment-based facility but you have the choice of where your money is invested:
Pay a large proportion of your available earnings into this AVC (and still receive tax relief, assuming your payments are within the limits explained below)
You choose where the money is invested and therefore the level of risk
Option to take all the fund as tax-free cash at retirement (subject to an overall limit)
Is this the source of your confusion?[/QUOTE]

This may well be where the confusion has arisen but it doesn't alter the facts that I had no intention of investing that lump sum in either my USS pension or an annuity from Pru or another pension provider and I understood that I could take it all, as I would not exceed the limits of the scheme. I did make that quite clear at the time however I have no way of proving that unless they have kept a copy of the recorded interview and will make it available to me.
I have now left the University so have no opportunity to discuss this with the Pru rep, who only visits once a year, and although I did speak to them on the phone they became very deffensive when I said I felt I have been mis sold this product and they said they would launch an investigation and I would hear within five days, but no contact as yet (7days!!)


RPC As a new user I am told I cannot attach documents or embed links. Yes I do belong to the RCN so thank you for reminding me. . They do offer a number of support services for us so I will contact them.

Poolgranny

dunstonh wrote: »

No. They have a duty of care to present the information accurately and answer questions factually. They are not responsible for you misunderstanding something that was said unless you asked them and they responded incorrectly.

Yes you are right they do have to answer factually but surely they have a responsibility to ensure the lanuage/terminology they use and the way it has been presented it clear and unambiguous. They are after all speaking to 'lay' people and not financial experts.

jamesd

Poolgranny wrote: »

USS have given me a mind boggling number of options that i can choose from including and the ones you mention

Are you quite sure that you understand the ones that have been mentioned? One of them is to take all of the AVC as a lump sum, up to 25% of the total value of your whole USS pot value. This part:

"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 in 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"

You've written that the value of the AVC part is £22,500. What is the value of the rest?

What is preventing you from doing what's described?

Your intended use for this money is also somewhat puzzling. Paying off a mortgage with pension money can be expected to make you worse off, so why would you want to do it? Do you have an exceptionally high mortgage interest rate, say over 7%, or some other compelling reason to make yourself worse off long term to clear the mortgage now?

Poolgranny

jamesd wrote: »

You've written that the value of the AVC part is £22,500. What is the value of the rest?

What is preventing you from doing what's described?

Your intended use for this money is also somewhat puzzling. Paying off a mortgage with pension money can be expected to make you worse off, so why would you want to do it? Do you have an exceptionally high mortgage interest rate, say over 7%, or some other compelling reason to make yourself worse off long term to clear the mortgage now?

Now you are getting technical! (Sense of humour returning weeping and gnashing of teeth didn't help)
I have three quotes and three options in two quotes and two options in third.
Quote 1 LTA £183989.75, £186509.76 and £189343.20
Quote 2 Involeved using AVC's to buy additional years and I was advised not to do this.
Quote 3 LTA £2111757.36 and £208303.82.

My plan was to take Quote 1 option 3 giving me a lump sum of £45996 (USS) and as I thought liberate my £22500 from the pru. I have another lump sum coming from another source.
I have an outstanding Interest only mortgage of £85,000. Lifetime Tracker Bank Base rate +2.79% that has 4year 6 month to run. So I planned to pay this off as the interest on this to term will be £12690 at current bank base rate. So unless there is a way that I can gaurantee a return on my investment of £85,000 that exceeds £12690 I don't see how I am going to worse off. My £22,500 was to provide the cushion I needed after the mortgage was paid and I had no other income than my small pension. But now I can't do that if I have to invest the AVC whether that be with my main pension provider or a n other. I have no other savings.

jem16

Poolgranny wrote: »

I understood that I could take it all, as I would not exceed the limits of the scheme. I did make that quite clear at the time

That is exactly what you can do but it is you that is misunderstanding what that means. If you have asked if you can take all of the AVC pot as a lump sum then they have correctly given you the answer of yes.

However that does not mean take a 25% lump sum from the main scheme AND all of the AVC pot.

Quote 1 LTA £183989.75, £186509.76 and £189343.20

Can you explain how the 3 figures have been calculated? In other words what actual pension and lump sum are you being offered in these 3 options and why are there 3 options?

Quote 2 Involeved using AVC's to buy additional years and I was advised not to do this.

Who advised you?

Quote 3 LTA £2111757.36 and £208303.82.

Again how were these figures compiled? Do they include the AVC pot? What pension and lump sum do they give and why 2 options.

My plan was to take Quote 1 option 3 giving me a lump sum of £45996 (USS) and as I thought liberate my £22500 from the pru. I have another lump sum coming from another source.

Until you explain, I'm going to assume Quote 1 is without AVC pot and Quote 3 is with AVC pot.

Pension tax laws only allow you to take a maximum of 25% tax-free from each pension. So if you keep the main scheme and the AVC scheme separate this is what you can do.

If both schemes are put together, then provided your 25% tax-free lump sum is equal to or more than your AVC pot you can take the whole of the AVC pot and the remainder from the main scheme.

xylophone

Leaving aside the AVC pot for the moment, what will your USS pension be if you take the maximum lump sum? Are you about to draw your state pension (or if not, when will you draw it)? How much do you expect to receive from the state pension?

Just what documentation do you have (and what did you sign) concerning the AVC contract?