AVC Benefits

Hawkey99 · Post by **Hawkey99** » 13 Nov 2018, 14:37

Hi Robert,

Can you did out one of your brilliant post on why AVCs are so good and repost it.

Reason being I would like to explain these to other colleagues but aren't great at explaining thing

Thanks

Post by **RobertT** » 13 Nov 2018, 19:26

I don't really make a note of any posts I make on these forums, or save them in any way. But:

AVC's are a great way of saving money, because you benefit from tax relief and salary sacrifice(PSE). Meaning each gross contribution of £1 only actually costs £0.68. That also applies to your main pension contributions into the DBCBS or the RMDCP!

With Bonusplan the gross weekly amount you pay is £2.88, but factoring in tax relief and PSE, that equates to only £1.96 coming out of your take home pay. Plus RM pay in around the same amount.
Meaning each year they'll be around £250 going in and it's only costing you about £100.

That might not sound like much, but add on time and investment growth and you could end up with a healthy amount of money.

Personally I've been paying into Bonusplan for over 20 years and the value of mine is currently just under £16,000. But my net contributions over the years only amount to around £2,800.
RM have put in roughly the same as me, tax relief and PSE is around £750 and the rest is investment growth.

In practice £16k on it's own isn't really a huge amount of money in the general scheme of things. But depending on what else you've got, it could make all the difference!
For just £2 per week(albeit for 20 odd years) it's been a damn good investment, and in my eyes is an absolute no-brainer!

Flexiplan doesn't get any additional contributions from RM, but you still get tax relief and PSE.

Again personally, I started with very small amounts into Flexiplan and over the years I slowly increased my contributions when I had pay rises. I also put in a few lump sums from other money I'd saved along the way.

My account has grown into a tidy sum, which means that along with my main scheme benefits & Bonusplan, there should be no reason why I can't retire really quite comfortably at 60.

If I hadn't bothered saving anything and just relied on my basic NRA60 & NRA65, then realistically there would be no chance of retiring before 65 and possibly 67(my state pension age).

So my decision to save into AVC's has knocked at least 5 and maybe 7 years off my working life. And I'm thoroughly pleased with my decision to think about and save towards my retirement from an early age. I've made the most of my money, I've made it grow and work for me and am looking forward to a nice early retirement.
I also have a personal pension designed to fund retirement before 60, which just benefits from tax relief!

My general pensions advice would be:

Try and think about and start saving towards your retirement as early as possible. It's not just something you think about when you're old!
Take advantage of any free money you can get for saving into a pension – tax relief, salary sacrifice and employer contributions.
Start with what you can afford, and increase contributions over time along with pay rises.
Do a 'stock take' once a year factoring in what you've got towards your retirement and what your aims are, and what you're going to do to achieve them.

I hope that helps!

Hawkey99 · Post by **Hawkey99** » 13 Nov 2018, 20:50

Brilliant.

Many thanks

NWpostie · Post by **NWpostie** » 14 Nov 2018, 09:06

I'm doing the same, each year I increase my contribution to my flexiplan and review my account performance, I've been in the RM pension scheme since I was 20, I will put in 31 years of pension payment and still got a while to go.

One tip I would give, take care of your health, stay fit, go to the doctors regularly, have a hobby that will keep you interested after retirement, this way you can enjoy the pension for a long time, you don't want to peg it at 61 and saving RM pensions a lot of money.

Decky Boy · Post by **Decky Boy** » 14 Nov 2018, 15:43

NWpostie wrote:I'm doing the same, each year I increase my contribution to my flexiplan and review my account performance, I've been in the RM pension scheme since I was 20, I will put in 31 years of pension payment and still got a while to go.

One tip I would give, take care of your health, stay fit, go to the doctors regularly, have a hobby that will keep you interested after retirement, this way you can enjoy the pension for a long time, you don't want to peg it at 61 and saving RM pensions a lot of money.

Good post brother

I've a question regarding the AVC Lump Sum.... are previous employer's pensions and private pension provision also taken into the equation when working out the 25% lump sum ??? I'm fairly sure (and hoping) they are ?

NWpostie · Post by **NWpostie** » 14 Nov 2018, 19:19

Probably something for RobertT to answer.

I suspect all pensions will be combined and 25% of that is tax free.

Post by **NorthernBoy** » 14 Nov 2018, 20:47

NWpostie wrote:Probably something for RobertT to answer.

I suspect all pensions will be combined and 25% of that is tax free.

Private pensions or pensions with other employers are treated separately to your Royal Mail pension. You are entitled to 25% tax free from each of your respective pensions once you reach the required age of the relevant scheme.

* If the combined value of your pension pots is over the lifetime allowance (of just over 1 million) then different tax rules apply to money taken above this limit.

NWpostie · Post by **NWpostie** » 14 Nov 2018, 23:15

That's useful to know.

Post by **RobertT** » 15 Nov 2018, 04:13

NorthernBoy wrote:
NWpostie wrote:Probably something for RobertT to answer.

I suspect all pensions will be combined and 25% of that is tax free.

Private pensions or pensions with other employers are treated separately to your Royal Mail pension. You are entitled to 25% tax free from each of your respective pensions once you reach the required age of the relevant scheme.

* If the combined value of your pension pots is over the lifetime allowance (of just over 1 million) then different tax rules apply to money taken above this limit.

Just to confirm, that is exactly right! Although pensions can be accessed any time after the legal minimum age, which is currently 55.

Meloned1 · Post by **Meloned1** » 18 Nov 2018, 16:30

Hi my first post on this forum on a subject that baffles me to say the least! I have an AVC rmpp avc cash which I think is not doing very well as I’ve been paying in £2.88 for many years and it’s total is units held 928.792, unit price 5.152 total £4785 ? Is it possible to change it to balanced plan ? Which shows a unit price of £8.559 ?
Sorry but I’ve not a clue about this stuff very baffling

Post by **RobertT** » 18 Nov 2018, 16:56

Meloned1 wrote:Hi my first post on this forum on a subject that baffles me to say the least! I have an AVC rmpp avc cash which I think is not doing very well as I’ve been paying in £2.88 for many years and it’s total is units held 928.792, unit price 5.152 total £4785 ? Is it possible to change it to balanced plan ? Which shows a unit price of £8.559 ?
Sorry but I’ve not a clue about this stuff very baffling

You're paying into the Cash fund with Zurich, which is only intended for short term investments, such as the last year or two before you retire and take your AVC money.
Over the last 5 years you'll have got a return of just 0.4% per year, on average!

The other 3 core funds have faired much better over the same period and will have grown your money much better, had you invested in them.

It's quite easy to change to another fund, just get in touch with the PSC in Sheffield. Their contact details and lots of AVC info is available on the RMPP website. I suggest a good read of the 'guide to AVC's'

The latest AVC fund performance info can be found here.

Meloned1 · Post by **Meloned1** » 18 Nov 2018, 17:04

RobertT wrote:
Meloned1 wrote:Hi my first post on this forum on a subject that baffles me to say the least! I have an AVC rmpp avc cash which I think is not doing very well as I’ve been paying in £2.88 for many years and it’s total is units held 928.792, unit price 5.152 total £4785 ? Is it possible to change it to balanced plan ? Which shows a unit price of £8.559 ?
Sorry but I’ve not a clue about this stuff very baffling
You're paying into the Cash fund with Zurich, which is only intended for short term investments, such as the last year or two before you retire and take your AVC money.
Over the last 5 years you'll have got a return of just 0.4% per year, on average!

The other 3 core funds have faired much better over the same period and will have grown your money much better, had you invested in them.

It's quite easy to change to another fund, just get in touch with the PSC in Sheffield. Their contact details and lots of AVC info is available on the RMPP website. I suggest a good read of the 'guide to AVC's'
Thanks RobertT your a great help on this matter I will do that this week thanks again
The latest AVC fund performance info can be found here.

Thanks RobertT you’re a great help will do as you say this week

Post by **RobertT** » 18 Nov 2018, 17:31

I should add and not knowing how much you understand about these things. That when you transfer your money it will initially be worth the same. The fact the Balanced fund has a much larger unit price doesn't mean your money will suddenly go up in value!

It means you're moving your money to somewhere else, that going by past performance, has done much better up until now. In practice you'll be investing in equities, which can be more volatile over the shorter term, but are expected to perform better over the longer term.

Meloned1 · Post by **Meloned1** » 18 Nov 2018, 18:23

RobertT wrote:I should add and not knowing how much you understand about these things. That when you transfer your money it will initially be worth the same. The fact the Balanced fund has a much larger unit price doesn't mean your money will suddenly go up in value!

It means you're moving your money to somewhere else, that going by past performance, has done much better up until now. In practice you'll be investing in equities, which can be more volatile over the shorter term, but are expected to perform better over the longer term.

Thanks for letting me know,I roughly thought that to be honest, and as you say they are doing better at the moment so it’s a wise choice for a few years thanks again for your support on this matter I’ll let you know next year how better

maisymoo04 · Post by **maisymoo04** » 02 Dec 2018, 14:37

hi Robert t thinking about taking out another flexiplan payment avc £20 week 100% growth think it would be ok as a good option or have a few options life style etc