Civil Service AVC

hugheskevi

tcallaghan93 said:

Seems bullish, because I'm assuming that number comes from expected nominal GDP growth, I.e. the return the government expects in additional tax revenues if they just threw money as the economy?

The discount rate is based on the long-term expectation of GDP growth, and was last changed in 2018.

The terms of the Brexit deal, COVID19 and associated fiscal and monetary measures will have affected estimates of the figures since then.

Bravepants

hugheskevi said:

Bravepants said:

You might want to compare the expected return from the AVC (which is probably going to give you annuity-like returns if you stick to L&G as the provider), with the return from Added Pension. You can pay for Added Pension out of your monthly salary and/or pay a single lump sum each year. 

The L+G AVC default fund is a typical multi-asset fund, and all forms of decumulation are supported. The returns will not be annuity-like (although I'm not sure what that means).

Return on Added Pension is effectively the discount rate, which is CPI+2.4%.

Sorry, just my lazy use of language. My annual AVC statement used to tell me "what I might get" as a final pension under three different levels of assumed growth. So the scheme would assume I was merely going to accept whatever pension Scottish Widows would give me depending on the value of my pot...hence "annuity-like". This was of course before the pension reforms. However, the same principle remains, yes you can take your AVC and draw down on it as much as you like, BUT if you use the the "safe withdrawal rate" of between 3% and 4% this is still effectively like treating your pension pot as though it was some form of annuity...you give yourself an annual pension by making a certain percentage withdrawal each year, which you really should adjust for inflation each year, and you cross your fingers hoping the pot will last you until the day you die (OK, with an annuity you don't have to worry about the last bit, BUT the equivalent drawdown would almost certainly be less than 3% of the pot). And that's all fine and dandy if you are so inclined, or if you have some other pension income, ideally Defined Benefit, but what a faff and a worry!

Why not just buy Added Pension?