Can you lose your money whilst contributing to AVC with Prudential?

cherry76

If contributing 6.5 % salary to prudential avc. Can you lose all your contributions if your funds are not doing well? I understand they can go up and down? Not sure how to chose right funds, so tend to go with low risks Thanks

dunstonh

 Can you lose all your contributions if your funds are not doing well?

You can lose more than your contributions during negative periods.

Not sure how to chose right funds, so tend to go with low risks 

Low risk can actually increase the risk.   Investment risk is one thing and appears to be the thing you are focusing on.  However, there is also shortfall risk and inflation risk.   And lower risk increase the risk in those two areas.

Timecale and regular contributions dilute the risk as you end up buying units cheaper during negative periods which then go up more in positive periods than the units you previously bought at higher prices.

Negative periods are nothing to be afraid of.

Marcon

dunstonh said:

 Can you lose all your contributions if your funds are not doing well?

You can lose more than your contributions during negative periods.

You're making it sound as if the whole fund could be wiped out and the individual would then be liable for charges on top of the loss! Might be true for some SIPPs but not an AVC where charges are based on fund value.

Linton

Marcon said:

dunstonh said:

 Can you lose all your contributions if your funds are not doing well?

You can lose more than your contributions during negative periods.

You're making it sound as if the whole fund could be wiped out and the individual would then be liable for charges on top of the loss! Might be true for some SIPPs but not an AVC where charges are based on fund value.

I took Dunstonh's comment to mean that if you chose a fixed period such as the previous 1 year then your losses could exceed your contributions in that period.

Marcon

Linton said:

Marcon said:

dunstonh said:

 Can you lose all your contributions if your funds are not doing well?

You can lose more than your contributions during negative periods.

You're making it sound as if the whole fund could be wiped out and the individual would then be liable for charges on top of the loss! Might be true for some SIPPs but not an AVC where charges are based on fund value.

I took Dunstonh's comment to mean that if you chose a fixed period such as the previous 1 year then your losses could exceed your contributions in that period.

Others might interpret it otherwise, hence my clarification.

NlghtOwl

If you’re not sure or confident in what funds to choose you may be better selecting default funds rather than low risk, especially over longer term. They are unlikely to be high risk anyway.

dunstonh

Linton said:

Marcon said:

dunstonh said:

 Can you lose all your contributions if your funds are not doing well?

You can lose more than your contributions during negative periods.

You're making it sound as if the whole fund could be wiped out and the individual would then be liable for charges on top of the loss! Might be true for some SIPPs but not an AVC where charges are based on fund value.

I took Dunstonh's comment to mean that if you chose a fixed period such as the previous 1 year then your losses could exceed your contributions in that period.

Correct. The answer was to the question asked which specifically mentioned: "during negative periods".

e.g. fund value is £100,000.  The contribution is £100pm (£1200 p.a).   20% loss comes along and the fund value drops £20,000 which is greater than the £1,200 that is paid into it in that single year.  So, "during negative periods" you can lose more than you contribute.