AVC contribution advice

linntroika · Post by **linntroika** » 16 Oct 2018, 11:06

Hi , i currently have 35k in AVCs split between Balanced 51%,Cash 8%,Cautious 33% and Growth 8% and wish to continue paying into AVCs for another 3 years . My question is to continue as they are or do i continue any future payments into Cash only ? Thanks in advance
Ps i will probably increase payments in the new year

Post by **RobertT** » 16 Oct 2018, 13:29

I'm not sure anyone can answer that question without knowing a lot more information.

How old are you?
When do you plan to access your pension/AVC's?
How much do your AVC's relate to your overall RMPP value in percentage terms?
How have your investments performed over the years?
Are you happy with your current investment choices?
Is there a reason you want to invest in the cash fund, ie you're approaching retirement and want to protect your money?
Are you planning on changing your current investment or do any changes just relate to new money going in?

linntroika · Post by **linntroika** » 16 Oct 2018, 23:01

RobertT wrote:I'm not sure anyone can answer that question without knowing a lot more information.

How old are you?
53 year old
When do you plan to access your pension/AVC's?
Plan is to take pension when i reach 60, however plan to leave RM at 56/57
How much do your AVC's relate to your overall RMPP value in percentage terms?
Current AVC represent 12%
How have your investments performed over the years?
Increased slightly over the years
Are you happy with your current investment choices?
So far so good
Is there a reason you want to invest in the cash fund, ie you're approaching retirement and want to protect your money?
Protection is important- is it possible to transfer total AVC built up to date to The Lifestyle option or Cash option
Are you planning on changing your current investment or do any changes just relate to new money going in?

Not sure , would like advice on AVC built up so far and next 3 year strategy

heapsy · Post by **heapsy** » 17 Oct 2018, 00:45

For what it's worth I am planning on making changes at the start of the new tax year. I'm 51 and am paying just short of £119 per week. £56 Growth fund, £35 Balanced, and £25 Cautious. Plus £2.88 Bonus plan. I intend to start reducing my exposure to the Growth fund and increase payments to the Balanced fund. This will be over the next 3 to 4 years. I will then transfer all my Growth fund holdings into either Cautious or Cash, retaining some exposure to the Balanced fund.I intend to take my AVCs at 60, when hopefully I will retire, or at least leave RM and maybe continue work else where for a few years.

Post by **RobertT** » 17 Oct 2018, 15:21

linntroika wrote:
RobertT wrote:I'm not sure anyone can answer that question without knowing a lot more information.

How old are you?
53 year old
When do you plan to access your pension/AVC's?
Plan is to take pension when i reach 60, however plan to leave RM at 56/57
How much do your AVC's relate to your overall RMPP value in percentage terms?
Current AVC represent 12%
How have your investments performed over the years?
Increased slightly over the years
Are you happy with your current investment choices?
So far so good
Is there a reason you want to invest in the cash fund, ie you're approaching retirement and want to protect your money?
Protection is important- is it possible to transfer total AVC built up to date to The Lifestyle option or Cash option
Are you planning on changing your current investment or do any changes just relate to new money going in?
Not sure , would like advice on AVC built up so far and next 3 year strategy

The general thing to do, is to invest in equities for the majority of the time and then slowly move away and into safer investments as you approach retirement, therefore protecting the gains you've made over the years.

The Lifestyle option does just that! All your cash is invested in the Growth fund until you're 8 years away from your chosen retirement date. It then slowly moves your money over to the other 3 'core' funds: Balanced, Cautious & Cash.

But the problem with that, is that it's based on age in relation to your chosen retirement date, and doesn't factor in whether it's the best thing to do from an investment point of view. It could transfer out of Growth right after a stock market crash for example, meaning you'll crystalise your loses! Therefore and in my opinion, a better approach would be to do the lifestyling yourself and transfer when the time is right.

But a lot will also depend on your attitude to risk and what you're already invested in. You seem to have a fairly cautious approach, but in my opinion putting too much into Cash at this stage is a bit premature. You only have to look at the fund info to know that the Cash fund offers only a very low return, at just 0.39% on average over the last 5 years. That's less than you'll get in a saving account! Plus, with the rate of inflation being quite a lot higher, it means you're money will actually be going down in value. So you don't want to be in cash for too long.

I'm a postman, so if you want proper financial advice i suggest going to an IFA, but my thoughts are:

With 7 years to go until you plan to access your AVC, having too much in cash means very little chance of your money growing and will effectively go down. So as your profile seems to be cautious, personally I would say most of your contributions for the next 3 years should go towards the Balanced and Cautious funds.

Try and get that percentage up to near the 25% mark if possible to maximise the tax free cash you can take.

You can transfer your AVC savings to any of the available funds. As you're already within 8 years of 60, I suggest you double check with the PSC whether transferring to the Lifestyle option is available.

Have a good read of the 'guide to AVC's'. Persoanlly I think it's the best pension guide RM have produced. It's available here.

I hope that helps.

linntroika · Post by **linntroika** » 17 Oct 2018, 22:17

Many thanks Robert for your valuable advice as usual

Post by **RobertT** » 18 Oct 2018, 19:48

It's also worth noting that although the Growth fund is regarded as the riskiest of the 4 core funds, Balanced and Cautious aren't too far behind on annualised performance over the last 5 years. Whereas Cash is way down.

But as is always said with share investments: Past performance is not a guide to future performance.

You can view the info for the AVC funds here.

maisymoo04 · Post by **maisymoo04** » 22 Oct 2018, 05:02

morning folks anyone else think the RM PP AVC GROWTH is a good choice on my flexi plan and bonus plan been contributing for about 10 years now in both and if not can you change your investment choice ??

Post by **RobertT** » 22 Oct 2018, 14:33

maisymoo04 wrote:morning folks anyone else think the RM PP AVC GROWTH is a good choice on my flexi plan and bonus plan been contributing for about 10 years now in both and if not can you change your investment choice ??

As has been said up thread:

You can change your investment choice if you wish.
The fund or funds that are right for you will depend on your age and attitude to risk.

maisymoo04 · Post by **maisymoo04** » 22 Oct 2018, 18:24

oopppsss yes I have just read the thread thanks