AVC transfer to Sipp - fa advice?

markinsouthsea

I am in the process of transferring an old avc that is part of my deferred final salary scheme pension provision.

On speaking with my Sipp help desk today they said that I may need to take professional advice with regards to this transfer, due to the tax free cash option. The value is around £15000 I am trying to transfer. I am not trying to transfer the final salary element of the deferred pension.

I am surprised that this has been mentioned that they may insist that I get a financial adviser to advise me whether what I am trying to do is in my best interests, especially with the value being just £15000.

Does what I have been told sound correct ?

Brynsam

Yes. SIPP providers have a duty of care to their clients - and many now refuse to accept any transfers in from a DB scheme (even if it is only the AVC part) unless a financial adviser gives confirmation they they have recommended the transfer.

Linton

It is possible that your DB scheme has the option of taking the DB tax free lump sum from the AVC so leaving you with both the maximum DB income and getting all or most of the AVC money tax free. If this is the case I suggest you work through the numbers carefully as transferring the AVC could be a bad idea.

campbell19925

markinsouthsea wrote: »

I am in the process of transferring an old avc that is part of my deferred final salary scheme pension provision.

On speaking with my Sipp help desk today they said that I may need to take professional advice with regards to this transfer, due to the tax free cash option. The value is around £15000 I am trying to transfer. I am not trying to transfer the final salary element of the deferred pension.

I am surprised that this has been mentioned that they may insist that I get a financial adviser to advise me whether what I am trying to do is in my best interests, especially with the value being just £15000.

Does what I have been told sound correct ?

Unless it is a free-standing AVC the AVC will be attached to the DB pension meaning you cant access the £15,000 unless you access/move the whole thing.

You'll need to take financial advice to do this as the value will be over £30,000 in total.

dunstonh

I am surprised that this has been mentioned that they may insist that I get a financial adviser to advise me whether what I am trying to do is in my best interests, especially with the value being just £15000.

Does what I have been told sound correct ?

Firms are allowed to make commercial decisions that insist on advice where they feel a transaction may not be in your best interests.

There has been continuing pressure on SIPP providers in the last few years to take more responsibility for the things they do. A number of FOS decisions have gone against them for carrying out instructions given to them without question.

AVCs can be hard linked to the DB scheme. In some cases, they can be used to pay the TFC instead of the main scheme. So, these would be some of the concerns that the SIPP provider will have.

cloud_dog

Two things.

Firstly, this conversation worries me as I have based my early retirement planning around being able to access my AVC before my DB NRA (transfer AVC to SIPP). Although, requiring a IFA review is still accessing the pot, granted.

campbell19925 wrote: »

Unless it is a free-standing AVC the AVC will be attached to the DB pension meaning you cant access the £15,000 unless you access/move the whole thing.

You'll need to take financial advice to do this as the value will be over £30,000 in total.

Secondly, I believe my scheme is set up similarly, whereby I could use the AVC as part/all of the 25% TFLS, or not. My DB administrators have confirmed that I can transfer the AVC 'pot' (if I were to leave my current employment and prior to NRA) without affecting and leaving the DB scheme/benefits in place. The same is also true at NRA.

campbell19925

If the DB scheme is linked to the AVC it is, in affect, the same thing. You cant do with one unless you do the same with the other.

Taken from pension avdisory service website:

"A defined benefit AVC (or added years AVC) allows you to buy additional months or years of membership in the employer!!!8217;s defined benefit pension scheme.

These added years then increase the pension benefits that you can receive at retirement through increasing the proportion of final pensionable earnings or career average revalued earnings.

As an added years AVC is tied to the main employer!!!8217;s scheme, benefits can only be taken from the AVC at the same time that benefits are taken from the main scheme."

cloud_dog

campbell19925 wrote: »

If the DB scheme is linked to the AVC it is, in affect, the same thing. You cant do with one unless you do the same with the other.

Taken from pension avdisory service website:

"A defined benefit AVC (or added years AVC) allows you to buy additional months or years of membership in the employer!!!8217;s defined benefit pension scheme.

These added years then increase the pension benefits that you can receive at retirement through increasing the proportion of final pensionable earnings or career average revalued earnings.

As an added years AVC is tied to the main employer!!!8217;s scheme, benefits can only be taken from the AVC at the same time that benefits are taken from the main scheme."

Ah, well, ok, but...

(I'm hoping my info/situation may be relevant to the OP also)

My 'AVC' is with a third party (Prudential) and is invested in funds I select. Within my scheme it is referred to as 'AVC', whether it is an old style 'Free standing AVC' and has simply been renamed 'AVC' I am unsure of but, what I am sure of is that I can use the AVC 'pot' as part of the TFLS and I believe I could use it to 'purchase' additional benefit at NRA (although have never sought further confirmation).

The below is an extract from the scheme/administrator in relation to transfers:

4. Do the Trustees charge the member for Transfer Values?
The Scheme is a defined benefit arrangement and Members are allowed one free Transfer Value of their Scheme entitlement in any 12 month period. There is a charge of £300 for any subsequent requested Transfer Value(s). If you have paid Additional Voluntary Contributions (AVCs) then you do have the option to transfer out only your AVCs, leaving your defined benefits within the Scheme; this is termed a partial transfer and if interested in this option you should contact the administrator who can provide you with a current value of your AVCs and further information.

dunstonh

The rules were changed in 2006 to allow AVCs to be unlinked and taken at a different time to the main scheme. However, it was up to schemes to decide whether to do this or not. Many of the A day changes were slow to happen on occupational pensions or haven't happened. Often no changes made until an individual wanting to use a post A day change raised it with the administrators and then trustees to get the scheme rules changed.

My 'AVC' is with a third party (Prudential) and is invested in funds I select. Within my scheme it is referred to as 'AVC', whether it is an old style 'Free standing AVC' and has simply been renamed 'AVC' I am unsure of but, what I am sure of is that I can use the AVC 'pot' as part of the TFLS and I believe I could use it to 'purchase' additional benefit at NRA (although have never sought further confirmation).

AVCs remain AVCs. FSAVCs were reclassified as personal pensions.

cloud_dog

I appreciate that this probably an unfair question but from the very brief info I have posted regarding my scheme but, is it likely that I would need to undertake a pensions transfer specialist IFA review should I wish to move my AVCs to a SIPP?

I have (just now) requested confirmation from the scheme administrators.

Marcon

cloud_dog wrote: »

I appreciate that this probably an unfair question but from the very brief info I have posted regarding my scheme but, is it likely that I would need to undertake a pensions transfer specialist IFA review should I wish to move my AVCs to a SIPP?

I have (just now) requested confirmation from the scheme administrators.

Waiting for their answer might be the best idea. They should know!