AVCs

DaisyS

I started paying AVCs into two schemes made available by my employer well over 25 years ago and I received annual statements basically giving the impression I would do pretty well out of these so I continued to pay into them. I believe interest of 3% and 8% was mentioned in the paperwork so of course, I thought they were a good place for my money.

I've now found out that they are actually worth very little money, perhaps not even as much as I've paid into them. In fact, by the time I've paid tax on 75% of the gross amount I certainly will have lost money. Does anyone know if I might have any prospect of a successful complaint to an ombudsman?
Thanks

dunstonh

I believe interest of 3% and 8% was mentioned in the paperwork so of course, I thought they were a good place for my money.

Interest is rarely involved. It is sometimes but not normally.

I've now found out that they are actually worth very little money, perhaps not even as much as I've paid into them.

That is highly unlikely.

Does anyone know if I might have any prospect of a successful complaint to an ombudsman?

1 - you say AVC. This would suggest it was not a sold product but an option you exercised through your workplace scheme. So, you cannot claim it was mis-sold
2 - you have thrown some assumptions into your post but its likely those assumptions are wrong. I would suggest you look at them again.
3 - you havent given any grounds for complaint. So, what would it be?
4 - you cant just go complaining to the ombudsman. You have to give the firm you are complaining about a chance to offer an explanation to your complaint first.

AlanP_2

Were the 3 and 8% perhaps illustrative annual returns to give you an idea of what IT MIGHT be worth if those rates were achieved?

How much p/month were you paying in for the 25 years?

Has the monthly £s value of your payments increased over the 25 years or have you carried on paying the same cash amount in each month?

What has the money been invested in and who with?

Why will you pay tax on the 75% (assuming that 25% is taken tax free)? It is possible that you could manage the withdrawal amounts and frequency to minimise or avoid tax (dependant on other income).

DaisyS

Thanks for your replies.

I've worked out that I paid in £10,800 over 25 years and I'm getting back less than that after tax is paid, even after the tax free sum.

Given that the firms involved gave me pretty rosy forecasts year in, year out, I'm very annoyed indeed. And yes, I do think they were misrepresented to me.

dunstonh

And yes, I do think they were misrepresented to me.

AVCs were not sold. They were bought. FSAVCs (which cased to exist in 2006 and were reclassified as personal pensions) were sold.

How was it misrepresented? After all, when you bought this, you couldnt take any lump sum from it. Yet now you want to take the lot.

I've worked out that I paid in £10,800 over 25 years and I'm getting back less than that after tax is paid, even after the tax free sum.

I don't believe you. Not accusing you of lies but I suspect it is misunderstanding. I cant believe that a fund value is lower than investment amount after 25 years.

Given that the firms involved gave me pretty rosy forecasts year in, year out, I'm very annoyed indeed.

The annual statements give projections based on a range of assumptions set by the regulator. The figures in 1990 would be much higher than today as investment returns were much higher then (although so was inflation). They did not choose what to display. The regulator did.

xylophone

Are you sure that you understand what you have?
Are you in a Public Service pension scheme? (eg TPS/NHS/ LGPS......)

DaisyS

Thanks both. No it's not a public service pension scheme and yes, I am clear about how much I've paid in to these AVCs and what I've been quoted to get the money out in full. I paid in over 25 years and left the firm so stopped paying in when I retired aged 57.

I'm going to look into this further because I'd have put the money elsewhere if I'd realised how little I would get back in the end. I've decided to take the full amount because one of these two AVCs said I could get £200 per year and the other was something over £100 per year. Nothing like the sort of figures that were suggested in their annual updates, even though I know I have retired early for health reasons.

xylophone

Did your former employer provide a Final Salary/Defined benefits pension?

You took your Scheme Pension early on the grounds of ill health? You weren't permitted to use the AVCs to increase Scheme Benefits/PCLS?

http://www.financialadvice.net/additional_voluntary_contribution_scheme/zone/376

It was not possible to purchase added years in the Scheme?

Which company provided the AVC policy/policies? Were you given any advice?

The reason I asked about TPS was this https://www.ucu.org.uk/media/pdf/t/h/avcadvice_oct05_1.pdf

DaisyS

Thanks Xylophone. I was in a final salary scheme until it closed about seven years ago. Then I joined the replacement money purchase scheme. I tried to get an enhanced pension from the final salary scheme - where I had most of the money - on the grounds I had advanced cancer but I was told I couldn't because the scheme had closed and all the previous benefits like enhanced pension for illness were no longer available. The AVCs were provided by Aviva and Scottish Widows. Staff were given a booklet to read and had to choose whether they wanted a low, medium or high risk strategy for investment. I believe I chose medium.

dunstonh

The AVCs were provided by Aviva and Scottish Widows. Staff were given a booklet to read and had to choose whether they wanted a low, medium or high risk strategy for investment. I believe I chose medium.

At least that confirms you were not mis-sold then.

DaisyS

Not mis-sold? That's a matter of opinion. I don't believe it said anywhere that I might get back less than I paid in. On the contrary, the impression was given that this was a very good place to invest. I'll be writing to both firms to ask for a detailed list of the payments I made and then I'll take it from there.