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Flexiplan AVC with Zurich
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nufcpostie470
- Posts: 3
- Joined: 26 Apr 2016, 17:56
- Gender: Male
Flexiplan AVC with Zurich
I have been paying into a Flexiplan AVC with Zurich for several years now and set the retirement age at 60. I am now 52 and wonder if anyone out there who also pay into this AVC can offer me any advice regarding the different payment plan options. I was told the Lifestyle plan was a good option to choose but speaking to our pension people at HR they weren't in the least helpful. I am also considering upping my payments between now and 2018 in case RM decide to close it down. Any advice would be gratefully appreciated
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jetblack
- Posts: 974
- Joined: 15 Apr 2011, 12:54
- Gender: Male
Flexiplan AVC with Zurich
IIRC with the lifestyle option, at 5 years to your elected retirement age they start shifting a proportion of your fund (20% pa ?) to less risky assets/funds away from the growth fund (which up till that point it will have been invested in 100%). In essence it starts moving away from the risky (but potentially high growth) Growth fund towards low risk bonds and cash.
Wether you believe that it would be a good idea , today, to switch your capital to low risk/low return assets on the strength of your reading of the current economic climate, is, ultimately your call. But the facility to do so is there within the Zurich admin setup. Or, conversely, keep 100% in the growth fund till your retirement date, is completely your choice.
Should also be stated that the RM AVC's offer only miniscule (NI) benefits over a SIPP - but with the SIPP you have way more investment options.
Re. upping your AVC's - I reckon thats always a good bet.
Re. the closure of the AVC options come 2018 - I can't, personally, see a good reason why RM would do that. Its completely seperate from the defined benefit scheme, and is no more costly to administer than an equivalent defined contribution plan (which, presumably, is what the current scheme will be replaced with (if we let it )).
But, as ever, I will happily stand corrected.
Wether you believe that it would be a good idea , today, to switch your capital to low risk/low return assets on the strength of your reading of the current economic climate, is, ultimately your call. But the facility to do so is there within the Zurich admin setup. Or, conversely, keep 100% in the growth fund till your retirement date, is completely your choice.
Should also be stated that the RM AVC's offer only miniscule (NI) benefits over a SIPP - but with the SIPP you have way more investment options.
Re. upping your AVC's - I reckon thats always a good bet.
Re. the closure of the AVC options come 2018 - I can't, personally, see a good reason why RM would do that. Its completely seperate from the defined benefit scheme, and is no more costly to administer than an equivalent defined contribution plan (which, presumably, is what the current scheme will be replaced with (if we let it )).
But, as ever, I will happily stand corrected.
Good security means trying to limit the damage a Trusted role can do
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RobertT
- EX ROYAL MAIL
- Posts: 6645
- Joined: 09 Sep 2007, 14:26
- Gender: Male
Flexiplan AVC with Zurich
As Jetblack says, with the Lifestyle option they gradually move your money from the equity funds into less volatile funds, but it’s when you’re within 8 years of your selected retirement age. The pension people at Chesterfield are useless in my opinion but there is a good guide to AVC options in the library section of the pensions website that gives you lots of info.
SIPP’s do have huge choices of investments running into the thousands in some cases. But with AVC’s you benefit from Salary Sacrifice(PSE) which means the government are effectively paying 12% of your contribution for you as well as the normal 20% tax relief that all pension payments get. So not exactly miniscule! Investments such as SIPP’s, etc would have to perform much better than average over the long term just to keep pace with the benefits that PSE provides in %age terms.
AVC’s are administered by a totally separate company in Zurich and since April 2015 it has been possible to take your AVC money out totally separately from the main RMPP, although not necessarily 100% tax free, see here: http://www.royalmailchat.co.uk/communit ... 27&t=69013" onclick="window.open(this.href);return false;. So in that respect they are separate. But as the aim of AVC’s is to provide better RMPP benefits than you would have got otherwise, by funding the tax free lump sum, they are still linked to one another.
Based on average life expectancy, it’s generally cheaper for a pension scheme to pay out a lump sum and a smaller pension, rather than just the full pension and no lump sum. So if AVC’s are allowed to continue after 2018, it would have the effect of slowly increasing the schemes liabilities, when it’s actually RM’s aim to reduce them.
SIPP’s do have huge choices of investments running into the thousands in some cases. But with AVC’s you benefit from Salary Sacrifice(PSE) which means the government are effectively paying 12% of your contribution for you as well as the normal 20% tax relief that all pension payments get. So not exactly miniscule! Investments such as SIPP’s, etc would have to perform much better than average over the long term just to keep pace with the benefits that PSE provides in %age terms.
AVC’s are administered by a totally separate company in Zurich and since April 2015 it has been possible to take your AVC money out totally separately from the main RMPP, although not necessarily 100% tax free, see here: http://www.royalmailchat.co.uk/communit ... 27&t=69013" onclick="window.open(this.href);return false;. So in that respect they are separate. But as the aim of AVC’s is to provide better RMPP benefits than you would have got otherwise, by funding the tax free lump sum, they are still linked to one another.
Based on average life expectancy, it’s generally cheaper for a pension scheme to pay out a lump sum and a smaller pension, rather than just the full pension and no lump sum. So if AVC’s are allowed to continue after 2018, it would have the effect of slowly increasing the schemes liabilities, when it’s actually RM’s aim to reduce them.
Links to all RM pension related websites are here
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nataddick
- MAIL CENTRES/PROCESSING
- Posts: 362
- Joined: 10 Jun 2010, 09:47
- Gender: Male
Flexiplan AVC with Zurich
Nufc
The question I would ask about your Flexiplan AVC is whether the selected retirement age of 60 is still relevant to your retirement objectives. If you intend to retire at 65 or later, then I would revise it. This would then defer the lifestyle option automatically. You do not mention what funds you contribute to at present but it is a matter for you to decide and the pensions helpline are notoriously unhelpful !
Following the recent pension freedoms there has been a lot of debate about whether Lifestyling is relevant in all cases, particularly as people have options to leave most of the fund invested for longer and withdraw periodic lump sums. See link.
http://www.pensionsadvisoryservice.org. ... ifestyling" onclick="window.open(this.href);return false;
I was 60 last year and took my NRA 60 pension benefits together wth my Bonusplan AVC although I am still paying into the latter to build a second, albeit smaller pot. I had an Addplan AVC which ceased at 60 and so elected to pay the same amount of £40 p.w. into a Flexiplan AVC. Personally, I chose my own funds with 40% in both Growth and Balanced funds and 20% in the Cautious fund.
Jetblack's point about the wider fund choice under SIPP's is right but the point that Robert makes about PSE is highly relevant as the 12% risk free incentive makes the Flexiplan AVC extremely attractive when coupled with the option to take the whole of the fund (subject to certain conditions) as a tax free lump sum - options not available under a SIPP.
In recognition of the fact that the RMPP will be closing to future accrual, probably from March 2018, if not before, I decided to up my Flexiplan AVC contribution to £120 p.w. retaining the same fund split percentages. I did this for two reasons: The first was to build up a Flexiplan pension fund pot equivalent to what it would have been at age 65 just in case contributions are no longer possible after March 2018. The second reason was that I wanted to take advantage of the PSE benefit while it still exists since it has been rumoured that it may be withdrawn as part of a Government spending review.
A couple of other points : Although I am paying my Flexiplan AVC through a reduction in my wages, I am supplementing my wages through a lump sum I hold elsewhere. Remember PSE has a participation limit that means that if your pension contributions to ALL types of arrangement e.g. Section C, Flexiplan and Bonusplan brings your income down to less than £10,000 p.a. or around £192 p.w. you will be taken out of PSE which would be a negative consequence. See PSE booklet.
So, personally I think upping your Flexiplan AVC contribution makes sound financial sense right now. In the unlikely event that RM allow the Flexiplan to continue in the future, there is nothing to stop you reducing your contributions back to your current level should you wish to do so.
The question I would ask about your Flexiplan AVC is whether the selected retirement age of 60 is still relevant to your retirement objectives. If you intend to retire at 65 or later, then I would revise it. This would then defer the lifestyle option automatically. You do not mention what funds you contribute to at present but it is a matter for you to decide and the pensions helpline are notoriously unhelpful !
Following the recent pension freedoms there has been a lot of debate about whether Lifestyling is relevant in all cases, particularly as people have options to leave most of the fund invested for longer and withdraw periodic lump sums. See link.
http://www.pensionsadvisoryservice.org. ... ifestyling" onclick="window.open(this.href);return false;
I was 60 last year and took my NRA 60 pension benefits together wth my Bonusplan AVC although I am still paying into the latter to build a second, albeit smaller pot. I had an Addplan AVC which ceased at 60 and so elected to pay the same amount of £40 p.w. into a Flexiplan AVC. Personally, I chose my own funds with 40% in both Growth and Balanced funds and 20% in the Cautious fund.
Jetblack's point about the wider fund choice under SIPP's is right but the point that Robert makes about PSE is highly relevant as the 12% risk free incentive makes the Flexiplan AVC extremely attractive when coupled with the option to take the whole of the fund (subject to certain conditions) as a tax free lump sum - options not available under a SIPP.
In recognition of the fact that the RMPP will be closing to future accrual, probably from March 2018, if not before, I decided to up my Flexiplan AVC contribution to £120 p.w. retaining the same fund split percentages. I did this for two reasons: The first was to build up a Flexiplan pension fund pot equivalent to what it would have been at age 65 just in case contributions are no longer possible after March 2018. The second reason was that I wanted to take advantage of the PSE benefit while it still exists since it has been rumoured that it may be withdrawn as part of a Government spending review.
A couple of other points : Although I am paying my Flexiplan AVC through a reduction in my wages, I am supplementing my wages through a lump sum I hold elsewhere. Remember PSE has a participation limit that means that if your pension contributions to ALL types of arrangement e.g. Section C, Flexiplan and Bonusplan brings your income down to less than £10,000 p.a. or around £192 p.w. you will be taken out of PSE which would be a negative consequence. See PSE booklet.
So, personally I think upping your Flexiplan AVC contribution makes sound financial sense right now. In the unlikely event that RM allow the Flexiplan to continue in the future, there is nothing to stop you reducing your contributions back to your current level should you wish to do so.