AVC Drawdown

joker193

I am retired and my previous company ran an AVC scheme where I contributed 12% and the company 4% of my salary. I took advice from an IFA who quoted in his plan that I could have drawdown of 25% of the fund under recent regulation changes. The fund holder also says I have the option of drawdown however, the Trustees say I do not qualify under this scheme. I have 2 professionals saying I can and 2 saying I cannot. What is the truth

dunstonh

You cant use the AVC to drawdown but you can transfer it to a scheme that does.

EdInvestor

Are you referring to taking 25% tax free cash from the AVC, followed by an income via income drawdown?

If so it may be that you will need to transfer the AVC fund to a provider which offers income drawdown (usually a SIPP, if it's less than 100k).

joker193

Thanks for that. What I had planned was to take a 25% tax free drawdown and a reduced pension from the remaining fund which is over £200k gross. Could 'Scheme rules' stop me trasnsferring to a fund that would accommodate this?

EdInvestor

Just to clarify, the term "drawdown" refers to an alternative way of extracting retirement income from a pension fund - the usual way being via an annuity ( a guaranteed income for life). With a drawdown plan , you leave the money invested and draw down an income every year.This gives the opportuinity for the fund to grow in the long term.

However it sounds like you are simply talking about taking out 25% tax free cash and the rest as an annuity income.

Are we at cross purposes here?

joker193

My apologies. Yes, I wish to take 25% tax free lump sum with the remainder providing a pension. I have had no problem with 3 other pensions including a smaller AVC. My IFA drew up a plan which included taking 25% from this company sponsored scheme but the Trustees say the Rules do not allow it. The fund holder - Windsor Life say I can. I'm stuck

dunstonh

Ahh, terminology. That may explain the misinformation. Its not drawdown you want but benefit crystallisation using annuity purchase and taking 25% pension commencement lump sum.

Rules changed on 6th April 2006 but occupational pensions were given 10 years to implement the changes. Some already have, some have not. It appears your scheme has not.

So, everyone is right. Yes you can do it but the scheme doesnt have to allow it yet. However, you should be able to put a case to the trustees and highlight the rule changes and how what you want complies with the new rules and has absolutely no impact on the main scheme, the employer, the administrators or the trustees. I supported a client on a case like this in 2006 and we managed to get the trustees to agree it once they realised the rules had changed.

joker193

Thanks for that, the letter is on its' way and the fingers are crossed.