Scottish Widows AVC (LGPS)

Wizard69

Hi, just looking at making AVC's into a Scottish Widows Local Authority Workplace pension. My questions are on the application it asks you to choose your own funds from a  list it provides. Maybe I'm being naive but I've never had to do this with a pension before I thought that was the job of the Pension provider to pick whichever funds it deemed the best based on your age and expectations. Secondly is there any advantage in choosing this scheme over going to an Independent financial adviser and just choosing a private pension scheme as I've also seen quite a few posts about the poor performance of some Scottish Widows Funds? Thanks

dunstonh

 Maybe I'm being naive but I've never had to do this with a pension before I thought that was the job of the Pension provider to pick whichever funds it deemed the best based on your age and expectations.

No.  That is the job of a financial adviser or yourself.  The provider just carries out what you or your adviser has selected.  They will have default options that typically suit the timescale but it doesn't mean it suits your awareness and understanding.

Secondly is there any advantage in choosing this scheme over going to an Independent financial adviser and just choosing a private pension scheme as I've also seen quite a few posts about the poor performance of some Scottish Widows Funds? 

It is difficult to say without knowing your objectives and circumstances and whether you have researched the alternatives.  For example, is LISA available to you?   Are you looking for earlier than the scheme retirement age (so have an objective of funding the gap until the scheme age) or at the same time (SW AVC has advantages if being used at the same time as the scheme pension but not if earlier).

daveyjp

Before opting for Scottish Widows you need to consider if your employer offer AVCs through salary sacrifice, if not are they likely to in the near future?  

Reason being is the salary sacrifice AVCs for LGPS is through Prudential.  If you open a Scottish Widows then SS is introduced you can't SS through Scottish Widows as they aren't set up to offer SS AVCs.

If your employer doesn't offer SS ask why not as its potentially a valuable employee benefit.

MX5huggy

The major advantage is AVC’s in LGPS are considered when you take your pension part of your total LGPS so within limits all your AVC contributions can be taken as your tax free lump sum. Compared with a SIPP where only 25% is taken as tax free.  

Yes you will have to chose funds to invest in, given the limited choice this should not be too hard. If you put a link to the choices we can probably give you a guide as to what to consider. 

As said if Salary Sacrifice is available you should do this, if it is not maybe as your finance director why not and why they are not saving employers NI by offering it. 

Wizard69

Thanks both, too old for LISA and have been reading up on the differences between APCs into the LGPS itself and AVCs into the 'in house' provider which apparently for the Worcestershire Pension Fund (LGPS) is Scottish Widows... I think maybe a visit to a financial adviser may be best..

Albermarle

I think maybe a visit to a financial adviser may be best..

Be aware that a financial advisor would normally not be interested as you have not built up any funds yet. In theory you could pay a one off fee for advice on how to invest within the AVC, but the cost may add up to a year or two contributions, depending on how much you plan to contribute.

MX5huggy

I wouldn’t bother with an IFA (the I being very important if you did). https://adviser.scottishwidows.co.uk/assets/literature/docs/43335W.pdf

There’s really only one fund to choose unless you want to build a portfolio of funds. That being the SW Consensus  Fund. 

SarahB16

MX5huggy said:

The major advantage is AVC’s in LGPS are considered when you take your pension part of your total LGPS so within limits all your AVC contributions can be taken as your tax free lump sum. Compared with a SIPP where only 25% is taken as tax free.  

Yes you will have to chose funds to invest in, given the limited choice this should not be too hard. If you put a link to the choices we can probably give you a guide as to what to consider. 

As said if Salary Sacrifice is available you should do this, if it is not maybe as your finance director why not and why they are not saving employers NI by offering it. 

I have recently selected where I would like my AVCs to be invested and I was surprised at the very limited choice I was given.  For Aegon/Scottish Equitable the choice is:
 - Mixed
 - Global
 - Long gilt fund
 - International
 - UK Index tracker (benchmark FTSE all share)
 - UK Equity (benchmark FTSE all share)
 - Ethical
 - Cash 

I had actually thought I would have been given more of a choice.  I was provided with the most recent quarterly fund sheet showing the performance covering the last ten years, the Aegon fund size and Aegon's view of its risk rating amongst other things but you are also provided with the ISIN number so can do further research yourself too.  It's sensible also to be aware what is happening in the economy too of course.  

I did not find it difficult to decide where I wished my AVCs to be invested (I selected two funds) and as I get older I will likely change the proportion of my monthly contribution I invest in these funds and may even select different funds. 

Albermarle

I had actually thought I would have been given more of a choice.

It is a bit limited, similar to some autoenrolment/ robo Sipps, like Peoples Pension for example.

On the other hand, you have to consider that the vast majority of people have little clue about investing, and even this choice would be baffling for many.