Posted by Employee on 05 July 2001 at 10:08:19:
In Reply to: Time to call it quits with AVCs from Equitable posted by jasminjade on 03 July 2001 at 11:11:04:
IBM transferred all AVC Plan members from Equitable Life to Friends Provident in the summer of 2000.
: The following letter appeared in the Financial supplement of the Mail
on Sunday (1/7) - could this be an IBMer
: J.M. writes: I am 44 and earn £26,000 a year. I am a member of my company
pension scheme and make
: additional voluntary contributions of £100 a month
into Equitable Life.
: Should I continue this arrangement, or would a stakeholder pension be better.
: J.S. replies: People earning less than £30,000 a year who are in a company
pension
: scheme can now also save up to £300 a month in a stakeholder
pension and get full tax
: relief on their contributions. This is a better
option than AVCs, which tend to be more rigid.
: With a stakeholder plan, you could build up a pension bigger than the
two-thirds of final
: salary allowed under a company pension scheme.
: It will also provide an extra tax-free lump sum when retiring - something
you do not get
: with AVCs.
: There is another angle to consider - the problems at Equitable Life that
have forced it to
: penalise investors who want to move their funds
elsewhere.
: If your Equitable AVC is invested in the Equitable's with-profits fund and
you go on making
: regular contributions, you are increasing the potential
penalty that could be slapped on you
: if at some time in the future you
decided that you wanted to move out of Equitable Life.
: Stakeholder plans are penalty-free, you can never be held to ransom if your
plan falls short
: of expectations and you decide to switch to another fund
manager.
: So I can see no disadvantage to switching your AVC contributions to a
stakeholder
: pension plan.