AVCs running alongside occupational pensions..

deejaybee

Hi all,

Quick question:

I have 2 separate deferred occupational final salary pensions with 2 different ex-employers.

I also have an AVC with both of the ex-employers, which runs alongside the main final salary pension.

Is it a general rule that you have to take the AVC at the same time as you take the "main" pension ?

Or is it possible that depending on the individual scheme rules, I could take the AVC part ( 25% lump sum, rest taxed at prevailing income tax rate ) from age 55, and leave the final salary part until normal retirement age ( 60 for one, and 65 for the other )

I will be 55 in November 2015, so I am assuming that Steve Webb's recent pension changes will have passed into law by then.

Thanks.

jem16

deejaybee wrote: »

Is it a general rule that you have to take the AVC at the same time as you take the "main" pension ?

No it's down to scheme rules.

Or is it possible that depending on the individual scheme rules, I could take the AVC part ( 25% lump sum, rest taxed at prevailing income tax rate ) from age 55, and leave the final salary part until normal retirement age ( 60 for one, and 65 for the other )

Possibly but dependent on scheme rules.

deejaybee

thanks jem, I will ask the question of the relevant administrators.

Difficult to get a concrete answer from them sometimes though..


<< edit >> For one of the schemes, it states that " If you leave service you can choose to leave your AVC account invested until you take your pension benefits or transfer the total value of your AVC account to another pension arrangement. There are currently no charges made for transferring "

and also " You may choose your selected retirement age at any time by contacting the Pensions Service Centre. Please note that the minimum age is 55 and the maximum age is 75 "

So it looks as though that one should be accessible even if I have to go through the hassle of transferring it elsewhere first..

Triumph13

Before you do transfer it, you might want to check if the AVC and main scheme can be treated together for the purposes of calculating the 25% lump sum and the lump sum then taken entirely from the AVC pot.

If the scheme rules do allow that, then doing it that way would probably let you take the whole AVC pot tax free - although the trade off is that you would have to wait and take it at the same time as the main benefits.

Some schemes allow this, some don't, but for those that do it is potentially a very valuable benefit.

deejaybee

Hi triumph,

Both schemes allow me to take the whole of the AVC pot as part of 25% lump sum.

Completely agree that it is a valuable "perk" for want of a better word.

However, I owe some money to member of family, that I have promised to pay back @ 55.

I do not want to take the final salary pensions early if at all possible, and taking the AVC pots ( if possible ) would be the least worst option.

One of the AVC pots has already crept just over £10K, so I might have to consider transferring it to let charges take it under that figure. Although obviously, the normal stock market fluctuations may take it back under £10K anyway..

The other AVC is nowhere near £10K, so no issues with that one.

atush

Can't you save up the money to pay back the family member another way? What about taking just one of the pots? What about paying them interest?

Might be rpeferable than using your avc pots now, then taking some of your pension as a LS later.

deejaybee

Hi Atush, thanks for replying !


It would be ideal if I could save up the money, however bought a property a few months ago, which we are gradually improving/decorating etc.

I would also like to start overpaying the mortgage at some point, so not loads of slack in budget anyway.

However regarding the AVC pots, the smaller one is not much over £1K anyway, which isn't going to make much difference , so I will probably just leave that one in place - it runs alongside the F/S scheme that is NRA 60.

atush

Far better to pay them back with your overpayments to mtg than damaging your income in retirement.

Basically, your FS pension is indexed for life so is far too valuable to diminish by taking part of it as a LS. The AVCs help you to not take a LS from the FS pension?

deejaybee

Worked out it would cost me just over £700 per month to save up the amount needed in the 19 months to 55th birthday...

That is definitely not affordable, but I am going to start stashing away what I can and at least make a decent dent in the amount.

Thanks for feedback.