Partner wants to pay AVCs via Standard Life.

Bravepants

Good morning all,

My partner works for a local authority, has a decent pension package, and various risk-based investments including the usual multi-asset funds in SIPP and ISA.

She has just slipped into the 40% income tax bracket and wants to try to offset this. So she is planning to purchase an AVC pension. She can take the AVC as a whole, tax free lump sum once she claims her LGPS, so she is only interested in saving the tax and doesn't want to take any further risk. 

She has selected the lowest volitility fund, which is "Standard Life Money Market Pension Fund". From Trustnet the fund's objective is stated as: 

"The Fund is intended to provide market leading returns from a portfolio of money market instruments and invests not only in bank and building society deposits but also in a variety of other money market instruments such as Certificates of Deposits (CDs), Floating Rate Notes (FRNs) including Asset Backed Securities (ABSs) where, when purchased, repayment is typically expected within 3 years."

So relatively short term.

Only downside is that it is actively managed with a charge just over 1%, but compared to the 20 to 40% tax saving and it coming back out as tax free cash, that seems OK.

Does anyone have any thoughts, or experience with this fund, or indeed with Standard Life?

Thanks!

Marcon

How old is she?

af1963

What are her alternatives ?  If she wants to use the AVC scheme that's associated with her final salary pension, in order to get the ability to take it as a tax free sum, she'll need to choose from one of the options that they offer, and that could be quite a short list.

dunstonh

She has just slipped into the 40% income tax bracket and wants to try to offset this. So she is planning to purchase an AVC pension. She can take the AVC as a whole, tax free lump sum once she claims her LGPS, so she is only interested in saving the tax and doesn't want to take any further risk. 

What risks is she considering?
The fund choice sounds like she is looking to reduce investment risk.  However, that fund choice means that shortfall risk and inflation risk have increased.      

She has selected the lowest volitility fund, which is "Standard Life Money Market Pension Fund". 

So, on the basis of that fund selection, she is expecting to retire and take full withdrawal in the next 3 years?

Albermarle

Does anyone have any thoughts, or experience with this fund, or indeed with Standard Life?

The Standard life name for their pension business is just a brand name, since they were taken over by Phoenix about 3 years ago. 
There were some concerns that their usually good service standards would slip but not obvious so far. The website is quite user friendly as well.
The charging structure for their 'non SIPP' offerings is 'all in ' - no separate charge for funds and platform.
Standard funds are usually 1% and there is normally a discount, negotiated by the employer ( can be up to 0.75% ) . Or if it is a personal pension there are discounts based on fund size. 
You maybe need to look into the charging structure for the AVC in more detail. 

AlanP_2

My, and my wife's, LGPS AVC was/is with SL and we have had no issues with any of their funds. We had an issue with admin but that has been amicably resolved now.

I doubt that the fee is 1% as there is likely to be a discount applied to that list price.


Agree with some of the sentiments expressed above is the timescale very short as if not a MM fund may not be the best option.

Bravepants

dunstonh said:

She has just slipped into the 40% income tax bracket and wants to try to offset this. So she is planning to purchase an AVC pension. She can take the AVC as a whole, tax free lump sum once she claims her LGPS, so she is only interested in saving the tax and doesn't want to take any further risk. 

What risks is she considering?
The fund choice sounds like she is looking to reduce investment risk.  However, that fund choice means that shortfall risk and inflation risk have increased.      

She has selected the lowest volitility fund, which is "Standard Life Money Market Pension Fund". 

So, on the basis of that fund selection, she is expecting to retire and take full withdrawal in the next 3 years?

Apologies, I should have said that she is 53 this year and intends to retire at 57.

Bravepants

af1963 said:

What are her alternatives ?  If she wants to use the AVC scheme that's associated with her final salary pension, in order to get the ability to take it as a tax free sum, she'll need to choose from one of the options that they offer, and that could be quite a short list.

Indeed it is. There are 6 options each of different volitility "rating". Our plan was to go with the lowest risk option as she's only five or so years from early retirement.