How does an AVC pay out?

Whiterose23

Hi, I have a very tiny defined benefit pension and small AVC with a past employer that currently stands at £1060 per annum. I signed up for the AVC at the time and that is managed separately by Legal & General and totals just £10,500. I’m able to check both separately online but I don’t understand how they are connected when it comes to taking them at retirement.
I’m able to get retirement quotes from each but they don’t appear to take each other into account? I thought they would be paid at te same time and are linked?
Sorry if I’m being thick but should I assume the quote from the DB pension includes the AVC? Or are they completely separate?

AlanP_2

Whiterose23 said:

Hi, I have a very tiny defined benefit pension with a past employer that currently stands at £1060 per annum. I also signed up for an AVC at the time and that is managed separately by Legal & General and totals just £10500.
Im able to check both separately online but I don’t understand how they are connected when it comes to taking them at retirement.
I’m able to get retirement quotes from each but they don’t appear to take each other into account? I thought they would be paid at te same time and are linked?
Sorry if I’m being thick but should I assume the quote from the DB pension includes the AVC? Or are they completely separate?

Don't assume anything is the best approach to finances, pensions and retirement.

Contact the DB scheme administrators and ask them, or at least get a copy of the scheme rules which will cover it.

How they relate to each other will depend on how they were originally setup so there is no simple answer that covers all situations.

SarahB16

Whiterose23 said:

Hi, I have a very tiny defined benefit pension with a past employer that currently stands at £1060 per annum. I also signed up for an AVC at the time and that is managed separately by Legal & General and totals just £10500.
Im able to check both separately online but I don’t understand how they are connected when it comes to taking them at retirement.
I’m able to get retirement quotes from each but they don’t appear to take each other into account? I thought they would be paid at te same time and are linked?
Sorry if I’m being thick but should I assume the quote from the DB pension includes the AVC? Or are they completely separate?

Depending on what your pension is per annum when you retire you may not be able to take all of the AVC as a tax free lump sum just something to bear in mind.  Currently your AVC is c.10 times your pension so based on the figures you are presenting now you wouldn't be able to.  However, as always check the rules of your pension scheme. 

Whiterose23

SarahB16 said:

Whiterose23 said:

Hi, I have a very tiny defined benefit pension with a past employer that currently stands at £1060 per annum. I also signed up for an AVC at the time and that is managed separately by Legal & General and totals just £10500.
Im able to check both separately online but I don’t understand how they are connected when it comes to taking them at retirement.
I’m able to get retirement quotes from each but they don’t appear to take each other into account? I thought they would be paid at te same time and are linked?
Sorry if I’m being thick but should I assume the quote from the DB pension includes the AVC? Or are they completely separate?

Depending on what your pension is per annum when you retire you may not be able to take all of the AVC as a tax free lump sum just something to bear in mind.  Currently your AVC is c.10 times your pension so based on the figures you are presenting now you wouldn't be able to.  However, as always check the rules of your pension scheme. 

My AVC is only £10,500? Both amounts are very small as I worked only part time for the company and it was quite some time ago.

When I get an annual statement from the DB pension, it quotes two amounts - one with a lump sum and one without. I just don’t know if it is referencing the AVC or not. 

The amount is so small I’m thinking of accessing it sooner rather than later as I need to update my kitchen. 

SarahB16

Whiterose23 said:

SarahB16 said:

Whiterose23 said:

Hi, I have a very tiny defined benefit pension with a past employer that currently stands at £1060 per annum. I also signed up for an AVC at the time and that is managed separately by Legal & General and totals just £10500.
Im able to check both separately online but I don’t understand how they are connected when it comes to taking them at retirement.
I’m able to get retirement quotes from each but they don’t appear to take each other into account? I thought they would be paid at te same time and are linked?
Sorry if I’m being thick but should I assume the quote from the DB pension includes the AVC? Or are they completely separate?

Depending on what your pension is per annum when you retire you may not be able to take all of the AVC as a tax free lump sum just something to bear in mind.  Currently your AVC is c.10 times your pension so based on the figures you are presenting now you wouldn't be able to.  However, as always check the rules of your pension scheme. 

My AVC is only £10,500? Both amounts are very small as I worked only part time for the company and it was quite some time ago.

When I get an annual statement from the DB pension, it quotes two amounts - one with a lump sum and one without. I just don’t know if it is referencing the AVC or not. 

The amount is so small I’m thinking of accessing it sooner rather than later as I need to update my kitchen. 

Regarding my post I should have made it clearer and have said some of the AVC may need to be taken as additonal pension.

Re your query (in bold) it is highly likely this just refers to your DB pension (and not your AVC).  Let's assume you take your DB pension (without the 25% tax free amount) then typically the limit for your AVC as a tax free lump sum is 6 and 2/3 with any additional AVC amount having to be converted into additional pension (well that's how it works for my LGPS pension) but do check your scheme rules.

Currently your AVC is more than 6 and 2/3 your forecast DB pension amount hence why I'm highlighting this to you as something you need to check.  

dunstonh

I’m able to get retirement quotes from each but they don’t appear to take each other into account? I thought they would be paid at te same time and are linked?

AVCs are largely obsolete.  The requirement for a DB pension to offer an AVC was removed in 2006.  So, many schemes stopped offering them or they still offer the same version they had in 2006.   A small number (often public sector) have some better options and functionality linked to the main scheme.

If the AVC doesn't allow the main scheme tax free lump sum to be taken from the AVC and/or there is no salary sacrifice available, then it may well be better to use an individual personal pension than the AVC.

Whiterose23

I’ve attached the illustration I received a couple of years ago from the main pension scheme. I assumed the lump sum option - shown here as KPS-MP fund was the AVC which is managed separately by L&G?

Marcon

Whiterose23 said:

I’ve attached the illustration I received a couple of years ago from the main pension scheme. I assumed the lump sum option - shown here as KPS-MP fund was the AVC which is managed separately by L&G?

No - that's the Kingfisher Money Purchase Scheme. Looks as if you had membership of both the Final Salary and Money Purchase arrangements.

See https://www.kingfisherpensions.com/left-scheme/ and contact the administrators for more information.

Whiterose23

This is a snapshot of what I thought is an AVC … it is managed by L&G … could this be the money purchase part of the pension scheme? Sorry I’m clueless about pensions. It has a different plan number to the Defined Benefit one above.

DRS1

What period of employment does this pension cover?  Did it straddle the closure of the Final Salary section and the start of the Money Purchase section for existing active members of the scheme (ie pre and post 2012)?
If you drill down in the How is this calculated bit from the page you have just posted what does it say?  Does it talk about AVCs or does it talk about post 2012 service/contributions?

Whiterose23

I was employed from 2000 to 2009 … I’m pretty sure the switch to DC scheme happened after I left.  this is what the ‘how is it calculated’ says (just generic info really):