Mis sold AVC's

atush

No one is being patronsing, you just aren't understanding.##Consider your pension (AVCs and main pension) as one larger pension. You get one 25% TFLS, and that is 25% of the total of the two.

Where your avcs are better than a Sipp, is, that you can use the to pay the LS so as preserving the maximum index linked DB pension possible, and you may also save nics in the process (don't know about uss) and you don't save these with a sipp. A sipp is only better if you want to retire earlier than scheme age and will not take a LS from the USS pension.

Thinking you can take the AVC 100% TF, PLUS another 25% from t the main pension is to my mind (after it has been explained numerous times) a willful misunderstanding.

I am just a lowly old scientist, with no connection to prudential. But e ven I understand why your AVCs were not missold and are a good value.

I was hoping our country's educators had a better understanding of basic math.

sillypossum

Thank you for your replies jem16 and atush.

So far I haven't taken out any AVCs. So far I have been given quotations by USS as to what I can expect in terms of a pension at various retirement ages - some of the options include a 25% lump sum of the USS contributions. In light of the changes in the budget I then enquired about AVCs via the Prudential and whether these would be available as a lump sum in totality without the necessity of taken out an annuity. The answer so far from the pensions manager is not clear on this point, but I have been told that I can take a 25% LS from these AVCs and if they did not amount to more than 25% of the whole pension pot, then I could take all of it as a LS. To me this referred to the AVCs only not the rest of the pension. At no point was I told that this then stopped me from having the LS linked to the USS part of my pension. It may be obvious to those of you who already know how this works, but I don't which is why I am making every effort to collect accurate information before I make a decision.

And atush when you say that no-one is being patronising and then write what you have written - well, words fail me.

I was advised to look at this site by Ermine, who writes a retirement blog. He also suggested I see a financial adviser, which I think may be a good option.

hyubh

atush wrote: »

Where your avcs are better than a Sipp, is, that you can use the to pay the LS so as preserving the maximum index linked DB pension possible

I think that is where the confusion is coming from - the chances are the member will be less 'preserving' their maximum index-linked DB pension than 'buying more' index-linked DB pension. This is because both the final salary and CARE sections of the USS are 1/80 pension + 3/80 lump sum, with the ability to either commute pension for extra lump or reverse commute lump sum for extra pension on an actuarially neutral basis either way.

As such, a reasonably sized AVC + standard lump sum (particularly if we're talking about a person in the closed FS section) will likely be well over the 25% limit, so that taking all the AVC as cash will mean the member has to convert standard lump sum into extra pension.

In contrast, a retiring LGPS member with an AVC (a far more common case on this board) would have a smaller standard lump sum (indeed, they might not even have any standard lump sum) and an unattractive 12/1 commutation rate were they to buy more lump sum from their main pension. Despite the 25% rule still applying, then, in their case the chances are even a large AVC could be taken all as cash without impinging upon their standard lump sum and this will be clearly advantageous (assuming they have something they want to use the lump sum for).

I am just a lowly old scientist, with no connection to prudential. But e ven I understand why your AVCs were not missold and are a good value.

I was hoping our country's educators had a better understanding of basic math.

Such rhetoric really isn't necessary.

Southend1

sillypossum wrote: »

Thank you for your replies jem16 and atush.

So far I haven't taken out any AVCs. So far I have been given quotations by USS as to what I can expect in terms of a pension at various retirement ages - some of the options include a 25% lump sum of the USS contributions. In light of the changes in the budget I then enquired about AVCs via the Prudential and whether these would be available as a lump sum in totality without the necessity of taken out an annuity. The answer so far from the pensions manager is not clear on this point, but I have been told that I can take a 25% LS from these AVCs and if they did not amount to more than 25% of the whole pension pot, then I could take all of it as a LS. To me this referred to the AVCs only not the rest of the pension. At no point was I told that this then stopped me from having the LS linked to the USS part of my pension. It may be obvious to those of you who already know how this works, but I don't which is why I am making every effort to collect accurate information before I make a decision.

And atush when you say that no-one is being patronising and then write what you have written - well, words fail me.

I was advised to look at this site by Ermine, who writes a retirement blog. He also suggested I see a financial adviser, which I think may be a good option.

Have you considered added years AVCs?

jem16

sillypossum wrote: »

The answer so far from the pensions manager is not clear on this point, but I have been told that I can take a 25% LS from these AVCs and if they did not amount to more than 25% of the whole pension pot, then I could take all of it as a LS.

If this is all that your pensions manager has told you, then I agree it's not been explained very well by someone who should be explaining it clearly.

What really should have been explained to you is that you are allowed to take 25% of the AVC pot and 25% of the main USS scheme as lump sums.

However the main advantage is that you are allowed to put both schemes together and take 25% of the whole lot. That lump sum can be taken from the AVC pot which avoids the need to lose valuable pension rights.

To me this referred to the AVCs only not the rest of the pension. At no point was I told that this then stopped me from having the LS linked to the USS part of my pension.

It's not entirely accurate as it all depends on numbers. An example may help?

Main USS scheme = £15,000pa lump sum plus £45,000 automatic lump sum.

AVC pot = £50,000

Both sections are added together to work out the overall 25% tax-free lump sum allowed. For final salary pensions the value is achieved by multiplying the annual pension by 20 so £15,000 x 20 = £300,000 plus the lump sum of £45,000 = £345,000.

Now add on the £50,000 AVC pot so £345,000 plus £50,000 = £395,000.

25% of that £395,000 is £98,750 which is what you can take as your maximum tax-free lump sum.

So going back to the USS pension and the AVC pot - you have £50,000 in the AVC pot and you are allowed to take £98,750 as a tax-free lump sum. So what you do is take the whole £50,000 from the AVC pot and the other £48,750 from the USS scheme. In this example you get both the USS lump sum and the whole AVC pot.

However let's assume a £100,000 AVC pot and still the same £15k USS pension with £45k lump sum. Total value is now £445,000 and 25% of that is £111,250. So you take your £100k from the AVC pot but can only take £11,250 from the USS as anything more than that exceeds your 25% tax-free amount.

As you can see what you can and cannot do comes down to exact figures in each section which is difficult to show precisely on a a website.

It may be obvious to those of you who already know how this works, but I don't which is why I am making every effort to collect accurate information before I make a decision.

Which I applaud you for. Far better to ask the questions beforehand rather than assume and that turns out to be wrong then call "missold" because you have misunderstood and haven't taken the time to find out.

He also suggested I see a financial adviser, which I think may be a good option.

It could possibly be an idea but I'm not sure it's totally necessary. Ask any more questions and we'll try to help. If you are still not sure then perhaps see an IFA.

Wotsisname2

Apologies for the delay in replying but I have been abroad for a few weeks.

dunstonh wrote: »

The pension mis-selling period was 1988 to 1993. The review that followed resulted in all companies having to put money aside. However, the person that set up the review has since said that with hindsight, too many people received redress that did not deserve it. By todays standards there was certainly some wrong doing but a lot of it was done on good faith but using poor assumptions (which historically had been possible but should really have been lower). However, that has nothing to do with AVCs.

Thank you for this, although my question was a rhetorical one. It also appears to me that your view is through the ‘rose tinted glasses’ of a Financial Adviser and not from the viewpoint of a victim of overzealous commission paid salespersons.

Wotsisname2

Apologies for the delay in replying but I have been abroad for a few weeks.

jem16 wrote: »

If Prudential has said that you can take your whole AVC pot and still have 25% tax-free lump sum from the USS, then everyone here would be interested in seeing that.

I did not suggest this, I said:


“It is my opinion that the Prudential is mis-representing the USS rules and regulations for their own financial gain in connection with MPAVC’s, thereby mis-selling the product. However, unlike Poolgranny I have the documentation to prove it.”

jem16

Wotsisname2 wrote: »

I did not suggest this, I said:
"It is my opinion that the Prudential is mis-representing the USS rules and regulations for their own financial gain in connection with MPAVC’s, thereby mis-selling the product.”

If Prudential did not say that, then what did they say that forms your opinion?

And I have the documentation to prove it

Then let us see it. If it's correct you will get help as to how to go about your complaint.

Wotsisname2

Thank you jem16 for your offer of help.


The evidence that forms my opinion is now with the Pensions Ombudsman and the help I needed to submit my complaint was provided by my Claims Advisor.

As I stated in my original post ‘ I will keep you all informed of the progress.’

jem16

Wotsisname2 wrote: »

The evidence that forms my opinion is now with the Pensions Ombudsman and the help I needed to submit my complaint was provided by my Claims Advisor.

I'm curious as to what you hope to achieve with the claim?

The Ombudsman cannot overrule pensions law which entitles you to 25% tax-free cash.

With the USS AVCs you will get a better deal than you would if you had gone elsewhere.