Pension fund advice leads to take-up of AVCs
UK - The West Midlands Pension Fund is running an initiative giving its over 50s members free financial advice and which has in turn led some members receive an extra 20% tax free on some of their pension savings.
Mark Crutchley, communications manager at the £6.8bn (€7.63bn) UK local authority defined benefit pension fund, said it has been working on a project with Prudential, the UK life insurer, to deliver advice to its over 50s members who are already in some form of retirement process to help improve their financial positions during the economic downturn.
More specifically, some members of the public pension funds have opted to invest some of their 25% tax-free pension lump sum entitlement in a third pillar additional voluntary contributions policy (AVC) and automatically earn an additional 20% on their savings.
"The fact they can take their AVCs as tax-free cash means they can take it as a lump sum one day and make 20% the next. It is one of the things that I support people to consider because they can get all of the AVC back as a tax-free cash lump sum," said Crutchley.
The financial advice is an add-on service both Prudential and the local authority are offering as part of an flexible assets arrangement the LGPS has with its AVC provider, Prudential.
That said, much of the advice being delivered to the 300 people who have so far attended evening consultation sessions looks not just at retirement savings but tax planning and investments too, in a bid to ensure members continue to save for retirement.
Under the rolling advice programme, both the fund and Prudential finance the hire of hotel space for the consultations.
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