Stock market impact on AVCs

royeee

With the current highly volatile stock market, does that impact on final AVC payments when you eventually draw that?

dunstonh

There is no impact on tax wrappers at all. The AVC is a tax wrapper just like a personal pension, ISA or bond. They dont lose or make money. They just act as a container for your investments.

If you are invested in the stockmarket within your AVC then the value of your investments will follow those movements.

royeee

In another thread 'Are pensions affected by stock market crash', someone said, 'If you have a money purchase (or AVC) scheme it will, as the funds your pension is invested in may have gone down (or up!) recently.'

Is that true?

MrChips

Yes it is true, but unless you are about to retire, the value now is almost an irrelevance. It is the value when you hit retirement age that matters.

If asset prices are low in the meantime, it means you can buy the units cheaper.

purch

the funds your pension is invested in may have gone down (or up!) recently.'

Yes, and as it is your money it would be a good idea to know where it is invested. You should receive at the very least an annual statement which will tell you what fund(s) your money is invested in, you can also ask them to provide a curent statement at any time.

Do not assume that just because you chose the 'Managed' Fund that there will be a fund manager carefully moving your investments around and shielding you from 'the real world' Most Managed pension funds are anything but....

dunstonh

You have to be in the stockmarket to get stockmarket performance (up or down). If you are invested in a property fund you will get performance related to property. If you are invested in gilts/fixed interest funds you will get performance related to those. If you are in cash funds you will get performance based on deposits.

Pensions (inc AVCs) can invest in different areas and a decent portfolio will be spread around those areas rather than having all your eggs in one basket. As you get closer to retirement you should increase the cash and fixed interest content and reduce the stockmarket just in case you happen to be 100% stockmarket and it goes down the day before you retire.

Retired_I.F.A.

Then when you are about to retire you may opt for drawdown rather than annuity purchase (left invested and draw an income rather than lock into for life annuity rates whose underlying investment is gilts) so a different attitude to risk is needed then.
Bottom line is review any investment regulary.

Note to self... lol , about time you pacticed what you preach.