No more AVCs...why?

dollyponduk

I used to work for a large company and had a pension pot with them Since leaving this pot was transferrred to Scottish Widows. Apparently I cannot add to the pot even though it is not a final salary pension. Why is this? I thought we were encouraged to save in our pension?

MallyGirl

There is nothing to stop you opening another pension if the SW one doesn't accept further contributions

foofi22

Assuming this is in fact a defined-contribution (DC) pension, I'd be surprised if you couldn't add extra post-employment contributions.

Have Scottish Widows told you this?

I'm no pensions expert but I thought "AVCs" aren't normally associated with DC pensions.

wjr4

Some pensions do not allow you to contribute more money to them once you have left employment. Set up a separate pension and contribute to that one (your workplace pension if you are in employment).

Albermarle

Another problem with older DC pensions is they do not offer drawdown, when it comes to take money from your pension. So you will probably have to transfer the SW pension to a different one anyway at some stage for this reason.

green_man

You will probably find that the company is paying part of the platform charges or at least has a very preferential rate agreed and as such is limited to only people employed by the company

DC contributions can have AVCs. My deferred DC pension has 4 notional pots:
Employer contributions
Employee contributions
AVC contributions
Additional Smart Contributions (These replaced AVCs once the rules changed to allow ‘smart’ contributions)

I’ve got so say though as far as I know none of these pots is treated any differently to any of the others, either tax wise, pension rules or other?

xylophone

Is this by any chance a S32 policy?

SonOf

No more AVCs...why?

The requirement to offer an AVC with an DB scheme was abolished in 2006. Main reason was that the retail market was getting to the point where it was matching AVCs in cost.

Since then, the retail market has gone much lower in cost that most AVCs.

Money purchase schemes didnt need an AVC as most allow you to increment your contributions via the main scheme.

Apparently I cannot add to the pot even though it is not a final salary pension

If your pension was transferred to a Section 32 buy out bond with SW then it is a single premium plan and does not offer regular contributions. There has also never been any requirement to offer an AVC alongside a section 32 buy out bond. Indeed, an AVC would be an inappropriate product.

If the SW plan is a COMP/CIMP or GPPP or GSHP or workplace pension, then many of those will not allow extra contributions when you leave the employment of the company. (none of those pension types are required to offer an AVC and it would be pointless to do so).

Why is this? I thought we were encouraged to save in our pension?

How is it that there not being an AVC available stop you from saving for your retirement?

It's a bit like saying that you cannot buy an Austin Allegro anymore so why is it being made so difficult to drive.