Zurich AVC Statements online

[mark.cup]

As above probably won't make good reading 1st year I've made a loss

[fly-catchers]

Which AVC do you have? I have a mix of cash & growth. The growth part which was down for most of last year is currently up a bit. But as with all stocks & shares can change quickly on a daily basis. But in the longer term- 5/10 years or more proves much better than interest on cash!

[RobertT]

I have my AVC’s (Bonusplan & Flexiplan) invested in the growth fund and they have seen a fall over the last 12 months, but that goes for the stock market as a whole so it’s not unexpected. On the plus side, when prices are low you are effectively buying in the sale, so assuming things go up again at some point, you’re quids in.

Also you really need to take tax relief in account because for every £1.00 you pay into your AVC’s, £0.20 is taken off your tax bill, so it only actually costs you £0.80. So the returns on the money you put in will be better than you think.

Personally I’ve been investing in equities since around 1999/2000 and have made a lot more that way than if I’d put my money into cash.

[mark.cup]

Have bonusplan and flexi plan in the growth fund can't really loose especially bonus plan it's near enough Royal Mail paying £2 for every £3 you pay then if you factor in PSE and every pound only costing 68p

Have been doing bonusplan for a long time and very pleased with its performance last year was crazy 1.2k investment return on only a 7.5k fund I will hopefully finish at 60 which gives it 19 more years to grow

Also started flexiplan a couple years ago I am aiming to take the AVC's tax free then take the maximum weekly pension from the main fund

[nataddick]

Even with zero growth, an AVC is a 'no brainer'. With the introduction of PSE a £1 investment costs just £0.68 as mentioned by mark.cup. Although not totally risk free, I do not know of a better way of investing for retirement and I have been involved in pensions for over 40 years.

Since it is inevitable that the RMDB scheme will be closed to future accrual beyond April 2018, I personally have chosen to substantially increase my weekly Flexiplan AVC until then to take advantage of the current incentives to do so, while they still exist ! I am using a lump sum I have invested in a cash ISA to fund the AVC on a weekly basis.

[fly-catchers]

I have both Bonus plan and Addplan AVC's. I also do regular payments into a S&S ISA. I had intended to take EVR last year at 57 but that fell through. Now (health allowing) I intend to stay till 60 and hopefully go soon after. Do you think its worth reducing some of the cash I put into my ISA (no way near the max on a RM wage) and start a Flexiplan AVC as well?

[RobertT]

I’d forgotten about PSE, which certainly makes saving into AVC’s a very good deal!

The big question with AVC’s though is what will happen to them when the RMPP closes in 2018(assuming it does)?

Those who were already paying into Addplan when the final salary scheme closed in 2008 were allowed to carry on contributing and will benefit from additional qualifying years which will have probably cost them less than they’re likely to receive over the course of their retirement. But will that continue if the RMPP is closed completely and replaced by the RMDCP?

Bonusplan (section C only) is based on 4.5% of the Lower Earnings Deduction and benefits from extra contributions from RM although the yearly amounts going in are quite small. Mine equal about £120(me), £30(tax relief) & £100(RM).
So again, with the RMPP expected to close will that continue?

Flexiplan on the other hand is a relatively straight forward DC scheme with no RM contributions but still with the benefit of tax relief and PSE. But will we still be able to pay into it after 2018 and if we can, will it along with Bonusplan, still be used to fund the pension commencement lump sum?
Or will it be stopped in 2018 and any extra payments we chose to make have to go into the RMDCP or else a completely separate pension scheme?

Paying extra now while you can certainly isn’t a bad idea at all.

[nataddick]

Agree with your thoughts Robert which is why I have elected to up my contribution until March 2018.I can always review when the proposals for the future of RMPP are made known.

[mark.cup]

Bonusplan according to Royal Mail has to be paid until you stop working for them so hopefully that will continue hardly anyone in my place does it most have never heard of it I only tell the few decent blokes I like to join it so don't think it costs the company that much?

My guess is unless a new law comes in our 3 pensions including whatever the new one will be just all get combined so they can calculate the 25% tax free sum... fingers crossed anyway

I've been doing flexiplan for a couple of years but have increased my payments several times usually at pay rise time so I don't notice it now paying in nearly twice as much a week as my section c pension with a view to getting out early failing that it will all be passed on tax free for my kids if not

[jetblack]

Since it is inevitable that the RMDB scheme will be closed to future accrual beyond April 2018, I personally have chosen to substantially increase my weekly Flexiplan AVC until then to take advantage of the current incentives to do so, while they still exist !

I don't quite follow this - the only thing the AVC has going for it is tax relief, and you'd get the same tax relief on any pension contribution/sipp. This will still be the case post 2018.
I understand that you might think a cash Isa is rubbish (what with current interest rates) and that it might be a good idea to drip feed the money into the Zurich funds - but why before 2018 in particular ?
Why not, for eg., drip feed the cash into a gold etf held in a sipp instead ?

[nataddick]

No tax relief is not the only thing going for a Flexiplan AVC. As mentioned above pension contributions (within the limits set out under PSE scheme) also reduce the amount of NI that is paid at the current rate of 12%, so a £1 investment costs £0.68 net of tax and NI relief. There has been a lot of speculation that the current Govt may, at some point in the future, decide to abolish salary sacrifice schemes (of which PSE is one example) and therefore the additional 12% reduction in cost may no longer be available, as NI contributions would need to be paid in full. Then there is the question of how AVC's will be affected by any changes to the RMPP post 2018 which RobertT has outlined in his post. These issues have a bearing both on the cost and flexibility of RM AVC's going forward beyond 2018.

I have a SIPP with a leading provider and I am happy with the both the choice and performance of the funds I have selected from the many that are available. However, the additional 12% 'gain' afforded by paying into a RM AVC, offers an almost risk free return depending on the fund selected. This for me personally, makes the RM AVC preferable to paying into my SIPP or any other form of retirement investment. Yes, the fund choices are limited with the Zurich plans but if I hold my investment in the cash fund I still gain the 12% extra. The charges are also lower than in my SIPP.

My plan is to build up my Flexiplan AVC fund by the maximum amount that I can afford to provide a larger cash lump sum and pension at retirement.

Since I firmly believe that the RMPP will close to future accrual after April 2018, I have elected to use money I have in a cash ISA to supplement my wages, as I pay more money in advance into my Flexiplan AVC while the current scheme is still open and while PSE still exists.

[RobertT]

In my opinion the main aim of Bonusplan and Flexiplan, particularly for section C members, is to fund the tax free lump sum when you take your pension. Therefore you can still have an unreduced income aswell as the lump sum.

Personally I plan to take my NRA60 and my AVC’s at 60 and based on current values, I would get roughly double the amount of tax free lump sum that I would have got from just my Section C pension if I had no AVC’s at all. And I’d still have the full pension too!
Infact I should actually have some AVC money left over, which I plan to drawdown until 65 when I'll take the NRA65 element.

I'm only basing my calculations on the RMPP being open until 2018 and I see anything I get from the RMDCP beyond that date as a bonus to a certain extent.

The importance of 2018 is that we don’t know yet how AVC’s will be treated in relation to the closure of the RMPP. It could be that no more payments will be allowed into them, so it makes sense to save as much now while we can. If no changes are made then it’s no harm done and as nataddick has said, PSE might not be around forever either.

[nataddick]

Spot on Robert! The point you make about the aim of these AVC's does not seem to be very widely understood. I took my whole Bonusplan AVC last year at NRA 60. Not only did it increase the overall amount of tax free cash I was able to take by 25% of the Bonusplan value but the whole AVC value was deducted first when I received my tax free cash thereby leaving a higher residual pension. I have carried on paying into Bounusplan and will continue to NRA 65, IF I am allowed to do so.

[jetblack]

Re. national insurance.
There's a little bit of smoke and mirrors going on here I think. My pay (based on the few payslips I've so far had this financial year) has dropped around 2.25% thanks to national insurance. I'm worse off.
How so ?

[RobertT]

Re. national insurance.
There's a little bit of smoke and mirrors going on here I think. My pay (based on the few payslips I've so far had this financial year) has dropped around 2.25% thanks to national insurance. I'm worse off.
How so ?

Because contracting out of the state second pension has ended and therefore our NIC’s have increased from 10.6% to 12%. We all received letters about it a few weeks ago. A bit of info was also on here: https://www.myroyalmail.com/news/2016/0 ... ion-change" onclick="window.open(this.href);return false;