How to convert an AVC fund to an annuity?

erb

dunstonh wrote:

It may have a 15% penalty but if you get an illustration from another provider based on the transfer value, you may well find that 15% is recovered over the remaining term. Also, you can more or less assume 0% on Eq Life

The guarantee you mention; is that annuity rate or minimum fund value?

Its as Pal says "Many Equitable Life occupational AVC schemes have a guaranteed 3.5% annual investment return."

dunstonh

many have but many havent. Its best to make sure rather than assume.

erb

Thanks dunstonh. I am not assuming as the Equitable Life statement confirms the 3.5%;) .

dunstonh

Is that 3.5% net of charges or 3.5% before charges? I don't know because both the EL plans I am transferring at the moment have no guarantees so cannot compare. If its before charges, it may water down that benefit.

erb

Not sure either if 3.5% is net of chagres or not.The advice we got from the Trustee's Pension adviser was that with regard to future bonuses "the terms of the policy include a guaranteed interest rate of 3.5% on the Guaranteed Value".

My last benefit statement for the Equitable Life AVC scheme shows a Guaranteed value on 31 July 2002 that is 27% higher than the transfer value on that date. I have not had a benefit statement since then but prior to that I got them every year.

Pal

The 3.5% is "net" of charges, although with-profits funds don't exactly work like that. The unlying fund pays the charges, The guarantee is that your own fund will increase by at least 3.5% a year. This is paid out of the fund that has already paid the charges, so any additional income above that level is going to be reduced by the charges. But with-Profits funds don't really work like that....

etc etc (long and dull). The bottom line is don't worry about charges.

dunstonh

Ok, that sorts that out then. However, I will just clarify that with profits funds can work like that. It depends on the provider. One big pension provider that makes charges after paying the bonus is Pearl. Also, most unitised with profits take charges after bonuses paid.

peterfleet

This is a vote of thanks to Debt_Free_Chick, dunstonh, and Pal, who a year ago steered me through the process of achieving this thread's question. A year on, and I am still pleased with the result for my retirement.

Many thanks again.

Pal

Your welcome.


Did your friend ever make a complaint about his late pension and his tax bill?

peterfleet

Pal.

Apparently he did not feel confident to take it further. I felt it kinder not to challenge his decision.