Using an AVC tb bridge 60 to 66 pension gap

jhluxton

I am 60 in October this year and could be in a position to retire from work and take the balance of my professional pension. Have been working part time with actuarial reduction of two thirds of my pension for last three years. It would appear that would generate around £16.5k gross with around £18k tax free remaining lump sum to be collected.

Additionally I have a Prudential AVC currently valued with terminal bonus of around £53k.

What I want to do is run down to nil my AVC pot from October 2019 to October 2025 when I can collect my state pension.

I understand a draw down plan is the best way to achieve this. I am not prepared to take a lot of risk and was wondering if there are any recommended low risk plans out there to achieve this?

I also have additional savings (premium bonds) which I have almost maxed out and probably will have done by this autumn unless the holding limit is increased.

I did speak to an advisor on the phone informally and they were suggesting investing these as well in a plan - but not keen to do that.

I enjoying the fun / chance aspect of the PBonds I am reluctant to do this and besides they have generated £550 in "prizes" over the past 12 months and would not really want to review this holding until I am 66 - when perhaps I might change direction with it.

I have virtually no debt, no mortgage, no rent only a small balance on a car loan which would be paid off in two years.

Would welcome any ideas / suggestions.

Thanks

Linton

It is likely that you would have to transfer the AVC elseswhere in order to drawdown. I suggest you check this with Pru.


Since you are using the money in the next 6 years I dont think investing in anything is appropriate and it would probably be best to keep it as cash. You could set up a ladder - split up the total sum you want to use in the next 6 years and keep 1/6 as cash to use in the first year, put 1/6 in a 1 year fixed term deposit account, 1/6 in a 2 year account... and 1/6 in a 5 year account.

PeterT8

Your plan seems sensible.

Before entering into a drawdown arrangement, though, it might be worth calling a few companies like Aviva, LV, L&G (etc) and asking them for a quote for a fixed term annuity. This would entail transferring the AVC fund value to them in exchange for a guaranteed income during the term. In theory, the level of income they offer might be slightly higher than a self-managed draw down arrangement where the monies are left in cash. Note, though, no flexibility with this option.

If you do opt for drawdown, be sure the check the differences between flexi-access drawdown (FAD) and uncrystallised funds pension lump sum (UFPLS). One may be slightly more tax-efficient for you, over the 6 years, depending on your plans.