Leaving AVCs to grow.

[nicechap]

Sorry if this has been asked before. So I have received my NR60 pension choices letter, Option 1, Option 2, Option 1A and Option 2A. 1A and 2A are slightly larger amounts than 1 or 2 as they include my AVC pot (circa £8k) but difference between Option 2 and 2A is the lump sum is about £2k more and pension increase about £300pa. In reading the attached material I see I can defer taking the AVC and let them grow. Has anyone done this before? And if so, can you choose when you to collect, so @65, @ 66 @ 70 etc? And can you choose to have them as a pension or lump sum/ 25% lump sum? Thanks in advance.

[RobertT]

The usual use of AVC's is to fund some or all of the tax free lump sum when taking your NRA60/NRA65 benefits. But there is also the option to transfer your AVC cash into a defined contribution pension scheme to access the money flexibly. But that has to be done totally separately from taking your main benefits – either beforehand or afterwards!

If you choose to make that transfer, you can then either buy an annuity(income for life), drawdown the money over a period of time or just take it all as cash.
But if you do transfer, only 25% of your cash is guaranteed to be tax free, with the rest being classed as income and potentially taxed under normal PAYE rules.

If you want to buy an annuity, the rates are quite low! So a 65 year old wanting an income for life with a pot of £8,000, would get a single life/level income of about £400 per year. Less if you want inflationary increases and/or spouses benefits on death.

There is no ability to buy extra RM pension with your AVC money!

You might find the 'pension flexibility' thread informative: https://www.royalmailchat.co.uk/communi ... 27&t=69013" onclick="window.open(this.href);return false;

Also the guide to AVC's: https://www.royalmailpensionplan.co.uk/ ... s_hr_3.pdf" onclick="window.open(this.href);return false;

[Steve_claret]

AVC's are not guaranteed to grow as it depends what funds you have the money invested in. If you are approaching retirement age then cautious or even cash are probably the best ones for you as both are lower risk. There is also a lifestyle choice which may be of use to you as this automatically reduces the risk as you approach your set retirement age.

[nicechap]

Thank you both or your replies, most helpul.

By my calculation each £1 yearly pension is £20.35 cash lump sum so I'm probably going for max tax free lump sum inc AVCs as the reduction of pension pot will increase yearly pension.

[NorthernBoy]

Thank you both or your replies, most helpul.

By my calculation each £1 yearly pension is £20.35 cash lump sum so I'm probably going for max tax free lump sum inc AVCs as the reduction of pension pot will increase yearly pension.

Is your NRA60 in section c of the plan?

My plan will be take the max lump sum if the conversion rate is still 20 to 1 when I retire.

[nicechap]

I believe I'm section C.

Hope this helps.

[NorthernBoy]

I believe I'm section C.

Hope this helps.

Thanks, thought it was section c.