AVC help!

Theogirl_2

Hi, I wonder if anyone is able to help me with this little problem.

I paid a small amount into a occupationally linked AVC, about £100 a month with Scottish Widows. I have stopped contributions since the tax band went from 22 to 20 %. The fund has a value of 10K approx. I am a 35 yr old woman who will also get an occupational pension. It didn't seem like quite enough (on the forecast), hence paying the extra bit.

My main question is about the fund, it is currently in a With profits fund and the fund managers have written to me to say that they are not recommending new people to join this fund and outline 4 conditions why that I don't truly understand. They recommend switching and I have got a booklet from SW called Investment options and charges, it looks like I could switch with out an MVR though in the letter they warn me it might be subject to one.

Should I switch and if so should it be to an in house SW fund or to externally managed funds that SW offer that have higher charges? I may be able to spread the 10k across many funds, is this worth it?

If I switch should I then start payments again too? I use my cash isa allowance each yr but not my shares one (I don't really know what I'm doing despite trying to get my head around it).

Sorry this is so long, if you even got to the end thank you

david78

If you are paying into an AVC through work, then you must also be paying into an occupational pension. If you are not doing this then perhaps your "AVC" is really an occupational pension.

You should not be getting correspondence from the fund managers, but may have received a letter from the pension trustees (these will be people who work for your company). I guess they are recommending new investors to pay into the unit linked funds available under the SW plan, rather than the with profits fund. You could leave your with profits fund alone and just invest new monthly contributions (when you re-start them) into one of the unit linked funds.

If you switch your with profits fund to a SW unit linked fund there will be a MVR. You won't be able to switch to a fund with another fund manager, unless the trustees offer this facility.

Alternatively, it might be a good idea to pay your £100 per month into a stocks and shares ISA (as you already use your cash ISA allowance) rather than an AVC or personal pension. When you are older and perhaps paying 40% tax, it may be more beneficial for you to pay into a personal pension instead or as well.

Best of luck

Theogirl_2

Thanks for your reply David. I wasn't as clear as perhaps I could have been. I have another proper occupational pension these are linked AVCs (not free standing). So though they are separate from my main pension they have some similar conditions like the retirement age (or the earliest I can get my hands on some money) and if I change employer I can no longer pay into this scheme. There don't seem to be any particular advantage to them, I could have bought added yrs but I could never find anyone to ask about this (either at my work or the IFA I have periodically seen).

You are correct about the letter, it was from the trustees of the pension scheme. What would the benefits of leaving the current fund in the with profits part? I'm not sure there is a reduction in fact they say not, but of course my fund then becomes subject to commission/charges. I will check the MVR status though thanks for that.

Thanks for the ISA heads up. Thing is I don't really know what I am doing and going it alone scares me. I have seen an IFA in the past (we me and other half have) and the one we have doesn't fill me with confidence and the other 2 we saw before deciding, well one was a disaster and the other so expensive for the amount we have to put away completely unrealistic. I will look into it though. It is unlikely I will earn above the 40% bracket in the near future and that is why we stopped my AVCs, as I didn't feel the relief was worth bothering with.

Cheers