Having another pension pot on a DB scheme

crystal_pixie_2

rpc wrote: »

My AVCs sounds similar to yours. I cannot use them for drawdown without transferring out my main scheme benefits, but they are cheap (low AMC and salary sacrifice contributions save NI).

As a result, I am making contributions to a personal pension to provide flexibility. I am also putting a small lower amount into AVCs primarily to increase my lump sum (if the PCLS survives another 25-30 years) and any leftovers can buy an annuity to mitigate against actuarial reductions or bridge the gap to state pension or whatever.

The choice of AVC vs personal pension (or SIPP or whatever) needs to be made in the context of your overall retirement planning. Every option has pros and cons and you need an overall plan that balances them all.

Thank you for the explanation and you are right there are some benefits to putting into the company AVC scheme but there are some restrictions which I feel don't fit into what I would like to do with my investments on retirement.

I am beginning to think that spreading out my investments is a sensible route so I have decided to set up a smaller monthly sum into the Company AVC scheme to get the benefit of tax & NI but look at transferring the SERPs pot to a SIPPS "wrapper" and concentrating on building this up so that I have some flexibility of when I could retire.

Just want to thank everyone for some really useful advice.

rpc

greenglide wrote: »

You don't need to buy an annuity. It may be that Prudential have only that option to offer you but you can transfer it elsewhere when you access the AVCs. You can also buy an annuity from any provider, not just Prudential (the open market option).

As these are AVCs, they are subject to the scheme rules.

With my AVCs, I have exactly two options:

1 - purchase an annuity after taking PCLS
2 - transfer out my AVCs and main scheme benefits (I cannot transfer the AVCs independently of the main scheme pension)

So, in some cases, there is only one real option which is to buy an annuity with the AVCs. Other scheme rules are flexible and will let you transfer bits of the AVC pot out periodically to do with what you wish. It all depends on the rules of the scheme.

rpc

crystal_pixie wrote: »

Thank you for the explanation and you are right there are some benefits to putting into the company AVC scheme but there are some restrictions which I feel don't fit into what I would like to do with my investments on retirement.

Be sure you know what restrictions apply to your scheme. I had a reasonably lengthy exchange with our pension administrators before deciding to start my personal pension to ensure that I understood the rules and restrictions fully.

Of course, because they can't offer Advice, they continually let me know that I have the option to transfer to a pension that supports drawdown and the only restriction is that my main scheme benefits must be transferred at the same time. Well gee let me think...

atush

As these are AVCs, they are subject to the scheme rules.

With my AVCs, I have exactly two options:

1 - purchase an annuity after taking PCLS
2 - transfer out my AVCs and main scheme benefits (I cannot transfer the AVCs independently of the main scheme pension)

So, in some cases, there is only one real option which is to buy an annuity with the AVCs. Other scheme rules are flexible and will let you transfer bits of the AVC pot out periodically to do with what you wish. It all depends on the rules of the scheme.

Are you 100% rule 2 is still correct, after the pension changes? It was my understanding AVCs were no longer tied permanently?

greenglide

I thought that this sort of thing was done away with some time ago.

I would never have paid into our AVC scheme if the fund could not be accessed as a 25% TFLS.

rpc

atush wrote: »

Are you 100% rule 2 is still correct, after the pension changes? It was my understanding AVCs were no longer tied permanently?

The answer from the administrators a year ago was
"Members of the scheme are only permitted to transfer their AVCs if they are a deferred member and are transferring their main scheme benefits at the same."

AVCs do not have to be tied to main scheme benefits any more, but so far as I know the trustees have discretion. This was part of the 2006 changes - is it those that you are referring to? I don't think the recent Lamborghini legislation freeing up pensions is directly relevant.

That I put money into a slightly more expensive personal pension rather than AVCs (where I will be one of the last few members) is not very high up on my list of worries. Eventually, the PP will become cheaper than the AVCs but it will take quite a few years.

crystal_pixie_2

rpc wrote: »

As these are AVCs, they are subject to the scheme rules.

With my AVCs, I have exactly two options:

1 - purchase an annuity after taking PCLS
2 - transfer out my AVCs and main scheme benefits (I cannot transfer the AVCs independently of the main scheme pension)

So, in some cases, there is only one real option which is to buy an annuity with the AVCs. Other scheme rules are flexible and will let you transfer bits of the AVC pot out periodically to do with what you wish. It all depends on the rules of the scheme.

RPC - I double checked with the company pensions team and you are correct. My only option would be to transfer out my AVCs or purchase an annuity. I think that because they are linked to the scheme they are exempt from the new pension laws.

So with this in mind I am exploring either a personal or a SIPPS pension to put this pot into. Cavandish online look like the best bet at the moment.

rpc

crystal_pixie wrote: »

My only option would be to transfer out my AVCs or purchase an annuity. I think that because they are linked to the scheme they are exempt from the new pension laws.

If you haven't already, ask specifically whether you can transfer out AVCs to another pension and leave the main scheme benefits intact. In my case, I can't but I think a good number of pension schemes do allow this.

You can then get all the good things about your AVCs and transfer them away when you need the flexibility offered by a personal pension, SIPP, whatever.

crystal_pixie_2

rpc wrote: »

If you haven't already, ask specifically whether you can transfer out AVCs to another pension and leave the main scheme benefits intact. In my case, I can't but I think a good number of pension schemes do allow this.

You can then get all the good things about your AVCs and transfer them away when you need the flexibility offered by a personal pension, SIPP, whatever.

I have asked the question and I would have transfer out of my main scheme as well. It seems that they havent changed any rules since 2007. If I did retire early I would have to take my pension which may not be the best thing to do. I think it would be better to have the flexibility to live off other investments and keep my DB pot intact. So I am looking at potential ways to invest this SERPs pot outside of the company scheme.

rpc

crystal_pixie wrote: »

I have asked the question and I would have transfer out of my main scheme as well. It seems that they havent changed any rules since 2007. If I did retire early I would have to take my pension which may not be the best thing to do. I think it would be better to have the flexibility to live off other investments and keep my DB pot intact.

Very similar situation to me then (and similar conclusions!). Oh the hardship of having a DB pension with a couple of discretionary restrictions :-)