Avc advice

mazco

My husband has a Free standing AVC that he's been paying into since 1991. He paid into it until he retired in 2002. He did not buy an annuity but has recently decided that he wants to take it now. However, he discovered when he rang them the other day that it is no longer invested it in a With Profits fund but was transferred to cash in 2002. He can't get an explanation of why this happened except to say that they did it a month before his projected retirement date of July 2002 when he was 60. He never planned to take it then and actually has letters from them saying that he was planning to take it in 2017 at age 75.
He has asked the company to investigate what has happened but would like to know from someone independent if he has lost money because of this.
The figure has gone up year on year until last year. It is still being valued at exactly the same figure as it was in April 2012. Again the company can't explain why he's had no interest at all in 8 months.
We can't seem to find out whether there is actually much difference between the amount he would have made in a with profits fund. Does anyone out there know how we could work this out?

GhIFA

Obviously can't give a definitive answer, but some things to bear in mind. Some providers will automatically switch from With Profits when the selected retirement age of the plan is reached, particularly if there were any guarantees built into the fund. This would have been outlined in the original policy conditions, but they should have told you this when you queried why it had happened. Whilst he may have intended to take the benefits at age 75, if the plan was originally set up with a retirement age of 60 (and then extended to 75) it probably wasn't possible to extend the With Profit investment beyond 60.

As to whether he has lost money, it depends on whether any bonuses would have been added to the WP fund since 2002. Potentially this wouldn't have been the case as many are now operating on a nil bonus rate. The cash fund is unlikely to be growing given current interest rates. The fact it is the same as in April is a plus, as some cash funds are losing money once the plan charges have been taken into account (although thats obviously not much of a plus!).

Of course, the reasons could be entirely different, but the above would be consistent with my experience of how some With Profits funds operate once the original retirement age has been reached.