Free-Standing AVCs

[D-IFF_ident]

Can anyone advise on the rules of FSAVCs? I took out a FSAVC 4 years ago, to 'pension' my flying pay (as the RAF won't do it). A friend recently advised me to check the rules of the 'flexible pension policy' to which my FSAVCs are paid; he suggested that I might do better to take out an ISA.

It turns out that the plan I've been paying in to is tied to my employer's pension scheme. I advised the friendly financial consultant that I could receive my employer's pension from the age of 38. However, the rules of the flexible personal pension state that if I take a pension from my employer before the age of 55 then the plan is frozen, and I get nothing from it until I am 55. The other options being to stay in the RAF until I'm 55, or not draw my 'Officer's retired pay' - the 'pension' we get between 38 and 55.

If I had taken out an ISA 4 years ago then I could have a cash sum of around £10 000 by the end of next year. As it happens I'll have a pension fund of around £7000, but which won't be much use to me.

A friend at Brize recently realized the same problem and cancelled his AVC. The company that sold the plan to him gave him £1500, but the pension fund remains frozen until he's 55.

I'm obviously concerned that I may have wasted a few grand. I'm also concerned that the RAF, in an attempt to fob us off with not pensioning additional PAY, will be making AVCs more readily available.

Does anyone have experience in this area, or suggestions on how to recover my situation?

[Tom Bell-Weed]

D-IFF
I'm in a similar boat regarding FSAVCs. I too was talked into this a number of years ago, not NBing at the time (and certainly not told by my IFA) that if I retired at 38 as was always the plan, the pension would be worthless. If anyone knows of a way to get the pension provider to transfer the cash to a different scheme, I'd be interested. My provider said it would be a breach of tax law.

Tom

[madonacurry]

Both of you have possibly been sold a 'pension' which could have 'over-funded' yourselves, ie IR rules on maximum allowable pension. I have known a couple of guys who took their case to the FSA re the pensions mis-selling fiasco and received a pretty good result

[arfurmoth]

I went thro this loop a while back. there should be an option to take out a small pension from your 38 point- its not big (or clever) but the company has to pay till you croak. The last time I asked it amounted to £500 per yr (having paid in for 10 yrs at £5o month) but annuity rates have crashed since.

[nigeriley]

Under IR rules FSAVC's can only be paid at the same time as the pension to which they were linked at the time of application, and cannot be used to purchase lump sum benefits. It is on this basis that the tax relief is given. ( All the details are in the booklet AFPS 1 ). Further advice should be available from RAF Pensions, RAF Innsworth on 01452 712612 ext 5144. The RAF benevolent Fund also run an advice line on 071 580 8343.. they are far more qualified to comment than I .. and can also discuss your personal situation more accurately...

Good luck anyway !

[Arkroyal]

Diff

You mention an option to 'not draw my 'Officer's retired pay' - the 'pension' we get between 38 and 55'.

Is this really possible now?

I've had to take mine over the last 7 years and give 40% of it straight back to 'fingers' Brown. I am sure there wasn't an option to leave it. If there is now, I'd be very interested and surprised.

[only1leftmate!]

I believe that if your IFA friend knew that you were entitled to an 'early' pension and intended to draw it then you may have been mis-sold. Not a big problem, just write to the financial institution concerned and let them know your concerns (in a slightly miffed tone) and they are duty bound to investigate the matter and cough up your dough at a rate of (about) 12% pa accrued interest should you be correct.

Your IFA should have sat down with you and ascertained all your financial details including your intentions for the next 10 or so years. You should have signed this document and he should have given you a copy. If this did not hapen then things are already beginnig to look bright for you, if it did then you will probably have all the evidence you need to hand.

I forget the name of the regulatory bodies involved but the Motley Fool website would be a good place to find out more.

[D-IFF_ident]

Thanks for the advice.

Unfortunately, I think the only way to not receive retired pay is to not retire - until aged 55. Which further makes my AVC useless.

I have dug-out my 'Personal Financial Portfolio' that Sun Life Of Canada (SLOC) sent me when I started the plan. I have not signed it, neither has the sales supervisor. It tells me that I plan to retire when I'm 55. It also says that the plan has been recommended as a 'top-up' to my employer's scheme, as the maximum benefit from the AFPS is based on 16 years service.

Time to put my big boots on and wade in deep then... Will report back later, in case anyone's interested.

Again, thankyou.

[L1011 Flyer]

Until 1999 there was no choice in the matter of when you took your FSAVC: Once you began drawing benefits from your main pension scheme, you also had to take the benefits from an FSAVC plan.

In summer 1999 the Pension Schemes Office (PSO)Update No 54 changed all that. This stated that AVC and FSAVC benefits may now start at any age between 50 and 75, regardless of whether the member retires or leaves pensionable service.

Unfortunately the decision to implement this is entirely voluntary so insurance companies can simply refuse to offer this facility. And as offering it involves altering the trust deed and the rules of their plans, not all of the FSAVC providers have chosen to take this step.

Hope this is of some help and good luck.