teachers pension AVC and Additional pension purchase

Mr_Pegs

Hi all, I retire in 6 years at sixty after what will be 32 years service and paying into teachers pension ( no intention of staying on ) I have a AVC plan with the Prudential worth £20,000 that I stopped paying into April 12. I focus on cash isas now in place of AVC ( clearly I still pay into teachers scheme and always will until 60 ).

Does any one have thoughts or experience of buying additional pension at this stage of my teaching life plus can I used the prudential money to buy directly from teachers scheme would this be could idea? anyone done this? or should I start the AVC again just want to make best choice to genarate best pension at 60.I welcome comments or thoughts thanks in advance

franklally

No thoughts on the AVC but you might want to look up what chucknorris and atush on here have to say - I tend to agree with what they are doing regarding additional pension. Basically my thought is if you have the money to spend on purchasing additional years you have the security of knowing the specific amount you will get each year at 60 - it is never going to beat more daring investments - it depends if you are a risk taker (which I am not).

littlelad

I don't think you can access anything from your Prudential AVC until the point you actually draw your TPS pension which you state is at 60. Are you a higher rate tax payer - may I ask why you stopped the AVCs?

atush

I would check with someone who is a teacher, or familar with those plans as I am not.

Try Jem maybe?

Also inforregardingyour AVC and rights to buy additional years is something your scheme rules should cover. ASk for a booklet or the web address to online resources.

If you can buy added years, check the rate (ie cash per year). It can quite often be a great thing to do.

jem16

Mr_Pegs wrote: »

can I used the prudential money to buy directly from teachers scheme would this be could idea?

I know that under the Scottish Teachers' Scheme, you cannot do this. I would be pretty sure that the England & Wales scheme is the same.

All you can do with your AVCs is to take 25% tax free lump sum at age 55 or later and purchase an annuity. The other option is to use flexible drawdown if you will have secure pension income from the teachers' scheme plus the state pension. With this option you could withdraw the lot with 25% tax free and the remainder subject to tax. However you may have to transfer to a provider that allows this.

should I start the AVC again just want to make best choice to genarate best pension at 60.I welcome comments or thoughts thanks in advance

You obviously have the option of purchasing Additional Pension in the main scheme or restarting the AVCs. The AP is obviously guaranteed unlike the AVCs but will be quite costly. It's still a good deal though, especially if you want no risk.

AVCs are pretty obsolete now unless they offer advantages such as taking the tax free cash from the AVC pot. The teachers' scheme does not allow this though so a personal pension may be a better choice.

However if you are a basic rate taxpayer, the better option may not be a pension at all but a S&S ISA which could give you more flexibility. However like the AVCs, there is no guarantee unlike the Additional Pension.

jem16

atush wrote: »

If you can buy added years, check the rate (ie cash per year). It can quite often be a great thing to do.

Purchasing Added years was withdrawn in 2007 and only available to those who had already started them. It has been replaced with Additional Pension which is not so good.

atush

I thought I had remembered there migth be a change, but as am not a teacher wasn't sure. Hence my referring to you ;-)

As I said, added years are great as that means you take investment risk out of the equation, but it has to be at a good price.

jem16

atush wrote: »

As I said, added years are great as that means you take investment risk out of the equation, but it has to be at a good price.

The Additional Pension still offers that as you purchase an additional amount of pension in the main scheme. It's just not as good as the added years option though. Fortunately I still have that option as I had started buying back years before they withdrew it.

zoopa

I have just cashed my AVC with Prudential. What remains is a tiny amount of money. Just less than £3,000. I have just discovered they plan to pay me £101 per year! I will be 90 before I get my money back. I feel really angry about this, as I want the money back in a reasonable amount of time. An advisor is going to ring me tomorrow. I feel really stupid, as I have signed the paper work. Do I have a leg to stand on?

jem16

zoopa wrote: »

I have just cashed my AVC with Prudential. What remains is a tiny amount of money. Just less than £3,000. I have just discovered they plan to pay me £101 per year! I will be 90 before I get my money back. I feel really angry about this, as I want the money back in a reasonable amount of time. An advisor is going to ring me tomorrow. I feel really stupid, as I have signed the paper work. Do I have a leg to stand on?

Possibly not if you have already signed.

Your only other choice is to use Flexible Drawdown if your Teachers' Pension plus your state pension is more than £20k. Then you can have the whole lot, with 25% tax free and the rest taxed as your normal income.