Prudentail AVC's - withdraw and invest or leave

VXman

I have investments in Prudential AVC's from when I was a teacher. It's in a Prudential With Profits Cash accumulation fund. I really didn't take much interest in it when I was contributing. Not contributed since I left UK teaching in Sept 2017. Value now is roughly £155,000. That's as a result of £75000 contributions over 11 years (2006-2017).
Since then it has been getting a bonus of approx £1300 each year.

I could it withdraw now as I am already retired , however that £155K could be subject to a market value reduction unless I withdraw at my proper retirement age 60 in Jan 2023.
What I'm wondering is, even though there may be a MVR if I were to withdraw it now, would I be better off anyway by putting taking it out and investing it in something simple like a VLS fund in terms of growth for a few years.  (Perhaps I should have thought about this in 2017 but we moved abroad so wasn't really focused on it)

Is £1300 per year on £155K OK? Has £80K on £75K of contributions over 14 years been reasonable growth for a low risk investment? 

So simple question is - leave it be for the final 2 years or take it elsewhere? Beyond 2023 the idea would be to gradually withdraw it to spend over 10 years or so.

dunstonh

I could it withdraw now as I am already retired , however that £155K could be subject to a market value reduction unless I withdraw at my proper retirement age 60 in Jan 2023.

Surely you are not thinking of drawing it out though?

What I'm wondering is, even though there may be a MVR if I were to withdraw it now, would I be better off anyway by putting taking it out and investing it in something simple like a VLS fund in terms of growth for a few years.

No.  That would be a truly dreadful idea.  You would pay enormous tax to withdraw it like that.     
What makes you think VLS is better?     An MVR on the pru exists for when the underlying assets are worth less than the current value. With VLS, the value would just fall.   No MVR is normally charged on scheme retirement age and its not often Pru have an MVR. They are usually slow to add one and quick to remove it. 

 Is £1300 per year on £155K OK? 

You have only mentioned one of the bonuses.  What are both of them running at?   you may need to compare transfer values if you dont have the bonus splits for annual bonus and final bonus.  i.e. what was transfer value last year vs this year.

There can be viable reasons to come out of a WP fund but you need to do it for the right reasons.   I am not sure your reasons are justifiable.  Although we have just a few lines in a post to go on.

VXman

dunstonh said:

I could it withdraw now as I am already retired , however that £155K could be subject to a market value reduction unless I withdraw at my proper retirement age 60 in Jan 2023.

Surely you are not thinking of drawing it out though? Not if there's no better place for it to be.

What I'm wondering is, even though there may be a MVR if I were to withdraw it now, would I be better off anyway by putting taking it out and investing it in something simple like a VLS fund in terms of growth for a few years.

No.  That would be a truly dreadful idea.  You would pay enormous tax to withdraw it like that.     Tax would need to be paid on it eventually anyway - but you are correct I suppose it could be managed better at retirement age.
What makes you think VLS is better?     An MVR on the pru exists for when the underlying assets are worth less than the current value. With VLS, the value would just fall.   No MVR is normally charged on scheme retirement age and its not often Pru have an MVR. They are usually slow to add one and quick to remove it. 

 Is £1300 per year on £155K OK? 

You have only mentioned one of the bonuses.  What are both of them running at?   you may need to compare transfer values if you dont have the bonus splits for annual bonus and final bonus.  i.e. what was transfer value last year vs this year. Yearly bonus is around £1390 Estimated Final bonus at the moment is £55,000 
So, figures  March 2020 were:
With profits account balance £94,500
Including Final Bonus £148000
Regular Bonus £1392
There can be viable reasons to come out of a WP fund but you need to do it for the right reasons.   I am not sure your reasons are justifiable.  Although we have just a few lines in a post to go on.

Just thought that WP funds did not provide particularly good returns. Don't really understand them to be honest. Maybe at this stage it is best left. That was the nature of the enquiry really. 

dunstonh

Tax would need to be paid on it eventually anyway - but you are correct I suppose it could be managed better at retirement age.

The tax you would pay for doing int in one go would be far higher than the tax paid by phasing it.
Pru AVCs allow ad-hoc UFPLS.  So, it can be a useful place to draw from periodically rather than all at once.

So, figures  March 2020 were:
With profits account balance £94,500
Including Final Bonus £148000
Regular Bonus £1392

You need to monitor the movements in the final bonus as well as the regular bonus.  Final bonus can change daily potentially.

Just thought that WP funds did not provide particularly good returns.

There are some really poor ones but there are some gems too.  Pru is one of the most viable ones still available.  Not so much on their modern plans but these older style ones are generally low cost and have provided good returns with some degree of capital stability.