AVC self investment

[jetblack]

Would there be a case for allowing us to buy/sell (limit buy/sell also for eg.) units within our AVC funds ? In much the same way that we are able to with a SIPP.

I suppose the existing rationale/idea is that the fund managers are better able to manage our funds than we ourselves are - thereby not recklessly frittering away our pension pots.

But, I ask, who has the greater incentive - myself, or the fund managers (who are gonna be paid regardless) ?


Whilst I'm at it - why is there such a limited choice of funds for AVC contributions ?

Some people might not want to trade - probably the majority - but then again,some would.

Its our money, after all. Why not give us that freedom ?

[RobertT]

I understand what you’re saying and I do agree the choice of AVC funds is very limited and should be bigger. But for RM to offer a SIPP would be going too far in my opinion.

There will be cost issues with setting up a SIPP and as the average AVC contribution most posties make is relatively small, most providers won’t want to know anyway.
Also the investment choices with a SIPP are huge. I have an equity ISA which has over 2,500 fund choices. If I took out a SIPP with the same provider I would have the same choices and could also buy shares in god knows how many individual companies aswell.

Based on these forums and conversations I’ve had with colleagues at my DO, many people don’t understand the basics. So giving them thousands of different investment choices will confuse matters even more.

If you want to pay into a SIPP, in practice you probably have 3 choices:
1) Open a SIPP aswell as your AVC’s, assuming your finances allow it.
2) Stop paying into your AVC’s and divert the money into a SIPP instead.
3) Transfer your AVC money and future contributions into a SIPP. Although as the main objective of an AVC is to fund your tax free lump sum, that may be a mistake.

[jetblack]

Yes, I hear what you are saying Robert.

I already have a SIPP - and it was my experience with that, and the flexibility and financial freedom that it afforded that made me wonder why the same freedoms couldn't be had with our AVC pots.

I currently have quite a few quid in AVC's - and I can't do a thing with it. Or, at least, my choices are very restricted. Zurich are on to a winner for sure here - whilst for my part I have to, well, just hope for the best. In some ways, you could say they have me over a barrel.

The admin of the SIPP is farmed out to a provider - in much the same way that RM has chosen to farm out the AVC's to Zurich. The costs of trading/dealing are borne out by us, as a percentage of the trade.

I would say also, that I would prefer to put money into the AVC "wrapper" than into a SIPP - this is mostly to do with Working Tax Credit and how its calculated. Don't know other peoples experience, but my recent experience has been that its very difficult to get the Tax Credits people to recognise the fact that I've put money into a SIPP - whereas the income figures that they have for me (that they must get via RM/HMRC) have already had the AVC contributions taken off.
Just for the record, the way they acquire my income figures has changed in the last couple of years - it used to be that it was myself that provided the figures - but now they get the figures directly from RM/HMRC, and its difficult to tell them otherwise.
For those that don't know, pension contributions are deductible when calculating your annual income for WTC purposes.

Anyhow, to get back to the OP, I can see no real reason to limit our choice. It would even be a nice start , in this day and age, to have some kind of realtime facility within the Zurich website to trade the funds currently on offer. I thought this was the original idea - but it doesn't seem so straightforward to do so.

The well off have great financial freedom - always have had - wouldn't it be nice to grant that freedom to the ordinary working man ? If he doesn't want to take advantage of it - then that is a personal choice - but it'd be nice to have the option. (Bare in mind also that the main body of our pension, the RMPP, is completely untouched and , hopefully, secure.)

Or can't we make our own choices ?

[RobertT]

I don’t think there is anything really stopping the pension scheme trustees from offering a SIPP or similar, but they have chosen to offer the current options instead.

Whether you choose to make AVC’s via those current options or pay into a SIPP or other pension arrangement is the choice you currently have!

Why not get in touch with the trustees and make a few suggestions:

Royal Mail Pensions Trustees Limited,

2nd Floor,

11 Ironmonger Lane,

London
 EC2V 8EY

[nataddick]

I have a SIPP with an independent provider, a Bonusplan and a Flexiplan with Zurich. The introduction of PSE tilted my monthly contributions in favour of the in-house Flexiplan AVC with Zurich. From April 2016 when the N.I.rate goes up to 12% it means it will only cost £0.68 to have £1 invested - this adequately compensates for the limited fund choice. The extra 12% is, effectively, an additional risk free return on my investment.

My view, for what it is worth, is that the Trustees have probably decided that there is limited demand for a SIPP from scheme members and that they have a duty of care to restrict members choices to relatively safe funds, even if the choice is somewhat limited.