Teachers' AVC with Prudential

Newly_retired

Have just finished teaching. If I do not take my annuity from my AVC scheme does anyone know what happens to my fund? ( assuming I do not take the open market option ) Can I just take the tax free 25% lump sum and defer taking the annuity for now?

suziewuzie

Hi, sorry I don't know the answer, but maybe someone will come along later! There are lots of knowledgable people on this site. Just wanted to say enjoy your retirement and ask a question of my own. Do you (or others) think it is worth paying extra contributions into this scheme? I've recently had a letter from Pru suggesting I consider 'topping up' by making these extra payments. I missed a lot of payments when I had my children so my contibutions are nowhere near the max. However, I do save in ISAs, reg savings etc. Not sure whether to pay more into the pension fund - they say you save tax on this, but I'm not that convinced it is worth it. Any thoughts?

Newly_retired

Thanks for your good wishes! It would have been my first day back today, so a strange feeling. As usual, I'm spending hours on this site instead!

I was advised that AVCs were no longer the best thing to put money in but I'm glad I did in that my contributions kept me out of higher tax bracket and all the form filling that would have meant for the last couple of years. My "pot" is higher than I expected so that's a good feeling . Like you I do not have full years in either State or Teachers' pensions so this was a way of making up the gap. However ( despite the A day changes ) you are limited as to what you can do with an AVC as compared to ISAs etc.
I'm no expert, but I am inclined to think that once you have started an AVC you might as well continue with it as the charges are very low, especially if you do not have many years to go. There is also an new teachers' Additional Pensions scheme started. Have you looked into that?

dunstonh

I was advised that AVCs were no longer the best thing to put money in but I'm glad I did in that my contributions kept me out of higher tax bracket and all the form filling that would have meant for the last couple of years.

If the AVCs can be used to enhance your tax free lump sum then they are good. If that cannot happen then they are poor value. The limited investment choice and inflexibility can make personal pensions/SIPPs a better option.

I'm no expert, but I am inclined to think that once you have started an AVC you might as well continue with it as the charges are very low, especially if you do not have many years to go.

The charges are not as low as they once were as modern alternatives are much better value than they used to be. Plus, if you use the Pru WP fund then you are paying more in charges than you realise as although the annual managment charge may look low, the fund is a 90:10 fund and upto 10% of the returns go to the shareholders. That is an implicit charge and one not disclosed on individual illustrations but is disclosed in their PPFM.

The TAP is a better option than the AVC. We had a lot of discussion on that earlier in the year on this board. The documentation issued at the time was quite frankly disgraceful leaving it very hard to make a comparison. However, that has been rectified to some degree and given the choice, the TAP should beat the AVC.