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Prudential AVC

Discussion in 'Retirement' started by manfred, Mar 5, 2011.

  1. Can anyone help with this please? I know I am being naive and should know these things, but when I retire shortly, do I buy an annuity with my Pru AVC? They have sent me a letter, telling me how much my fund is and how this translates to a yearly income, but no mention of buying an annuity, how it can be structured or whether I can move to another provider. Any advice appreciated.
     
  2. Can anyone help with this please? I know I am being naive and should know these things, but when I retire shortly, do I buy an annuity with my Pru AVC? They have sent me a letter, telling me how much my fund is and how this translates to a yearly income, but no mention of buying an annuity, how it can be structured or whether I can move to another provider. Any advice appreciated.
     
  3. You have to buy an annuity and/or take a lump sum with the money in your AVC at some stage. It is very important to do your research and shop around for the best deal as there is a 20% gap between the best and worst annuities. You do not have to stay with your current provider if you can get a better deal elsewhere.
    Once you buy the annuity there is no way of going back if you change your mind so take your time and look at all the options. Most people will spend more time buying a mobile phone than an annuity.
     
  4. Yes you do not have to buy your annuity from the PRU looks at the other company options I will also be doing this in the summer as you have to take the AVC when you take your main teachers pension.
     
  5. I was under the impression that you could buy an annuity any time from 55-75. This timing being independent of taking the main pension.
    Best to check this out, I dont have direct experience as I never had the pleasure of talking to high pressure salesmen from the PRU.
     
  6. Thanks I will check as I have the idea that an AVC is not the same as any ordinary extra pension.
     
  7. jacob

    jacob Lead commenter

    This is what independent financial advisers were invented for.
     
  8. Dunteachin

    Dunteachin Star commenter

    If you read any of the money pages in the newspapers, they stress that you must shop around and the PRU also advises you to do this. I tried to get an enhanced annuity with them on the grounds of certain medical conditions. I was flatly refused. Apparently, the company you have your annuity with never give you this enhancement!! This was told to a friend by a financial adviser; worth checking out. I don't think you have to take your AVC at the same time as your main pension. I took ARB at 55 last year and have deferred my AVC until I'm 60.
     
  9. I would suggest that you start with some research on the internet to understand the options available. Start by looking at 'Open Market Options'. Once you have learn what the terms mean you will have a find it less stressful and not as complex as it might appear now. Get a few on-line quotes to see what whats on offer.
    If you still want to speak to an IFA you will at least be able to follow what they are saying and judge if the offer is reasonable.

     
  10. Hi Manfred
    Went thru exactly your process when i retired year before last. So some points which might help:
    1. Remember you have the option to take out up to 25% cash from the "accrued AVC fund". I took full advantage of this and used the cash to pay off the remainder of my mortgage. If you have some oustanding debts then money advisors will always advise you to try to clear outstanding debts with any "new money" (Theory being that you would pay much more in interest on these debts than you would gain in interest these days)
    2. Yes you don't have to accept the annuity offered by AVC and in fact there are much better offers out there. Be careful though, there are lots of different <u>versions</u> of the annuity (Within each company). In my case I maximised the amount by having a fixed annuity i.e. not increasing (Guaranteed for ten years- so it would go IN FULL to my wife if anything happened to me) the reason was we still have children in University. Your case might be different so chose carefully what type of annuity you want (Plenty of info ON THE NET) Some annuities increase with inflation but start very low as a consequence- this did not suit me for reasons above.
    3. I looked at lots of annuity offers on the net. I did not use an IFA- i thought to save money. In my case the Aviva offer was the best- but i still ended up paying a one off fee of a few hundred quid to a "consultant" whom I phoned to say I wanted an annuity!

    Hope this helps- good luck

    Groucho
     
  11. annsue

    annsue New commenter

    Can anyone tell me what "Weslyan " is ? I am nearly 55 and wondering whether to cash in AVCs now (the lump sum is attractive as I still have a son in uni) but I am not retiring. I guess there would be tax implications but with all the bad publicity around the AVCs I feel I have been a fool , almost throwing money away each month. I really do feel conned as I was under impression I was buying lost years of teachers pension. Also, as I have a serious progressive condition which will require major surgery, I really feel I need advice. I was planning to retire at 60 but government seem to have other plans for me ( I have only 16 years in TPS which is why I followed Pru's advice " to make up the lost years") Not sure whether to just stop the monthly payments now. Would there be penalties?
     
  12. Dunteachin

    Dunteachin Star commenter

    I'm pretty sure you can stop payments without penalty, but ring and check. I haven't paid in to the Pru AVCs for years but the pot I have saved keeps growing. My last statement said it would increase by 7% a year until I am 60. (I took ARB pension last year at 55) That seems a good investment to me! Discuss it with them, before you make a decision.
     
  13. I would suggest you read the small print to check this.
    The growth figures produced normaly reflect the low, middle and high regulatory prescribed percentage growth in investments, normaly 5%, 7% & 9%. The figures used are for guidance purposes only and are not guaranteed. The actual growth depends on the markets. The actual return can be a lot more or a lot less than the regulatory rates the firms are required to use. In some cases the growth has been negative after fees are deducted.
     

  14. If you have evidence that is was the case you might be able to claim compensation for misselling, much would depend on what you signed. After having to pay large compensation claims in the past the Pru now ensures that its salesmen get people to sign a form to say that the risks of paying into their AVC, compared to the safe TPS option, has clearly been explained to them. They are also required to explain to teachers what alternative options are offered by TPS.
    The changes should make little difference to you. Your contribuitions up to the time the new scheme comes in will be ring fenced so you can still retire at 60. Its the younger teachers who will be most affected.
     
    plot71 likes this.
  15. annsue

    annsue New commenter

    Thank you both very much for the advice and info. I have been paying into AVC since 1997 but the pot never seems to increase. I do not have any written evidence of what the man from Pru said but of course the policy I signed does state that final payout could be less then predicted- naturally I accept that much. I am also angry at the unions who seemed to steer us towards this at the time. I think I will stop my contributions now and save the money (&pound;160 per month)elsewhere. A few years ago when I asked Indep. Financial Adviser advice, he said to stay in as "I'd come this far and wouldn't get the same returns or 20% gov input anywhere else."
     
  16. It is a very dificult situation. I am not at all convinced that saving using an AVC or the Prudential is the way forward. Typically, &pound;135K in your annuity pot will get you just &pound;4.5K - &pound;5K pa - and just think how much you have to put away each year to get anywhere close to that! The 3 projections typically given out in your annual statement out are nowhere near realistic. Projections based on 2%, 3% and 5% a year growth might be far more realistic.
    Now I don't know where you live but around here, &pound;135K will get you a two bedroom house in the right part of town for renting, which gets around &pound;5K - &pound;5.5K a year in rent, and of course, you have the house which can be passed on to your children. So how do finanacial institutions get away with it - Answer: heavy marketing plus heavier lobbying of MPs and MPs being too cosy with them.
    In my view, annuities are one of the last great cons from the financial services industry. You are forced to hand over enormous amounts of money to an 'investment company', who then only have to pay you a pittance each year for the privallage, and then constantly put out marketing that tells you all what a great deal you are getting!! And you wonder why few if any trust financial companies.
    The government wants to encourage us to save more for retirement. So why are they allowing financial institutions to continue to basically steal huge amounts of money from us?
    We want our Pension Pots from AVCs now! We want to stop financial companies being given the right to take the entire amount and give us less than we could easily get ourselves.

     
  17. In the early nineties, the Unions were advising us to put money into AVCs as a way of 'topping up' our pensions. This was at a time when interest rates were anything up to 18%. I have to admit that, at the time, I was tempted, and the man from the Pru came around to give me his pitch. I did not go ahead with the scheme as the Pru insisted on selling you a life insurance policy along with the AVCs. As i already had one, I could not see the point of having another, especially as the monthly premiums for the LIP were about half as much again on top of the AVCs. I count this as a lucky escape as falling interest rates have made AVCs almost valueless.
     
  18. Dunteachin

    Dunteachin Star commenter

    Hmm. Think I might cash mine in before I'm 60, then. There'll be a penalty for taking it early, no doubt. You are right, Albert. I fell for this when the Pru give a presentation in school in the early 90s. I haven't paid into it for about 14 years though; I have to say, the pot has increased substantially on paper. It remains to be seen how much I actually get, though.
     
  19. Dunteachin

    Dunteachin Star commenter

    Oops, just checked. Stopped paying into it 6 years ago. Has been steadily growing.
     
  20. I bet it has taken a massive hit it in the last two weeks!!
     

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