Prudential AVC with LGPS

Knowhere

Hi,

Now, though yet to crunch the numbers properly following the cost of living rocketing,  I'm still hoping to take retirement at 55 which would be early 2025.

I'm in the LGPS and many years ago now I opened an AVC with the Prudential as their designated provider.

I've changed my monthly contributions from time to time over the years, but not having a clue about investments I now see I have approx £50K which is 100% in the default option of 'Prudential S3 UK Equity Pen'.

Of course I'm aware of the old adage "investments can go down as well as up" and I'm concerned that when the time comes to take my LGPS pension, as I must take the AVC at the same time, then if the stock market is having a bad time then so will my AVC !

I recall reading something regarding moving such investments 'to cash' as you approach retirement and the time you will need to take it, presumably to avoid these potential losses.  Is that generally the recommendation?

If so, it leads to these questions swirling around my brain -
Is now a good time / right time / too early or late to do this?
If I should be doing so, I can see an option for "Prudential Cash S3" - I guess this is what it'd need the funds to be switched in to?

Thanks in advance for any guidance.

Ebeneezer9

I am in a similar position with an LGPS SC AVC, I am due to retire in three years seven months and I only recently started contributions.  I too would like to know if I would be safer to switch funds to “Prudential Cash S3”.

Advice gratefully welcome.

Albermarle

Of course it is safer to move more/fully to cash, if you intend to take the full amount within the next couple of years.
If the time scale is much longer than that being fully in cash means you are taking the risk of losing out on some growth.
The exact time to switch and by how much is a matter of opinion.

Ebeneezer9

Thank you Albermarle, I will contact Prudential.

saucer

Not wishing to speak on the OPs behalf but I think they will need to take the AVC at the same time as the rest of their LGPS pension. Bear in mind the excellent position of being able to do so 100% tax free within the limit of 25%  of the total pension value (being pension*20+AVC+CPLS)

Silvertabby

You don't HAVE to take your AVC at the same time as your main scheme LGPS benefits - but you would lose the options of taking the lot as tax free cash (within HMRC limits) or using it to buy additional index linked LGPS benefits.  

Knowhere

Thanks all, I would indeed be planning to take the AVC at the same time as the LGPS, so decision made to turn it into cash now to be safe - can't afford that to plummet unexpectedly just as I reach retirement 

Dansmam

I did exactly what you're planning OP as I was counting on the AVC to pay off the final bit of mortgage and wanted to be certain it would be covered. Moved into cash September 2019 and retired the following June. Just lucky timing but it was a relief to know I'd already done that when everything went south early 2020. 

AlanP_2

You need to consider what you are planning to do over the next 20 to 40 years and not just the date of retirement.

I had LGPS AVCs and, as I was planning on leaving the value invested after retirement in S&S ISAs then there was no benefit to moving to cash to safeguard a notional value.

If it is to repay mortgage for example then it's different.

Be aware of your personal objectives, no one size fits all answer.

Albermarle

Dansmam said:

I did exactly what you're planning OP as I was counting on the AVC to pay off the final bit of mortgage and wanted to be certain it would be covered. Moved into cash September 2019 and retired the following June. Just lucky timing but it was a relief to know I'd already done that when everything went south early 2020. 

It was the right thing to do, but interesting to note that from by June 2020, the market was pretty much back to where it was in September 2019.
Although you did avoid a potential panic when Covid first hit the markets !

saucer

AlanP_2 said:

You need to consider what you are planning to do over the next 20 to 40 years and not just the date of retirement.

I had LGPS AVCs and, as I was planning on leaving the value invested after retirement in S&S ISAs then there was no benefit to moving to cash to safeguard a notional value.

Coming back to this thread, didn’t that plan mean you missed out on being able to take the max lump sum tax free (as referred to by Silvertabby above)?