AVCs - Was it a good or bad idea?

mrsoft

I'm a bit green when it comes to pensions so forgive me if I come across as a little slow with this.

I'm a Public Servant with 19 years service and I was hoping to retire 5 years short of the 40 years required so I decided to take out an AVC to cover the loss of finishing early. I currently pay e70 gross (circa e43 net) per forthnight into this AVC since July 2011. The projected fund is 32k.

I've spoken to a couple of people over the past few weeks who have told me I'd be better off putting the money into the P.O. as at least my money is guaranteed.

Basically what I'm asking is should I continue paying into this fund? And can I take out the monies I have invested because I'm within a two year period.

Any help would be much appreciated.

coylemj

The people you've been speaking to are talking BS, they are trying to justify the wrong decision they now realise they made. If you put money into an AVC and it's invested in a managed fund, you are looking at very good returns so far and you should keep paying into the fund.

If you're in a managed fund, your money is probably invested in the likes of IBM, Vodafone, BP etc. - ask those people if they think those companies are going to go bust in the morning. Better still, ask them where they think your money is invested, they obviously haven't a clue.

If you want more security, ask for your avc fund to be put into cash and bonds or at least with a heavier weighting toward them/cautious funds
It's not all equities out there
Talk to whomever you have your avc with about your concerns and read up on it and if you have choice of funds

coylemj

bluewolf wrote: »

If you want more security, ask for your avc fund to be put into cash and bonds or at least with a heavier weighting toward them/cautious funds

Agreed but the OP has 16 years to go until he plans on retirement and cash & bonds will come nowhere near matching what equities will return in that period.

OP, there is almost always an option with AVCs whereby the money in your fund is gradually moved from managed (mostly equities) into more stable funds like bonds and cash in the years before you retire.

This usually takes the form of moving 10% of your money in each of the last 10 years before you retire, that way there is no sudden shock caused by a stock market crash the day before you retire. As long as you are more than 10 years away from retirement, I'd say you should leave all of your money in a managed fund which is heavily based on equities.

ibebanging

Any update on when the finance bill will be passed to free up some AVC funds ?

Thanks.

coylemj

ibebanging wrote: »

Any update on when the finance bill will be passed to free up some AVC funds ?

Thanks.

Follow it's progress at the website below.....

Note the section at the bottom...

Enacted as Act Number NN of 2013
Date of Signature: DDMMYY

When that's filled in with data, the act has been passed and promulgated (signed by the Pres.).

http://www.oireachtas.ie/viewdoc.asp?DocID=22833&&CatID=59

OP, I wouldn't be putting your money into cash until 5/6 years from retirement. A lot of funds are set up like this anyway afaik.

Imo, it's bad advice to do this when you have so long left.

ibebanging

coylemj wrote: »

Follow it's progress at the website below.....

Note the section at the bottom...

Enacted as Act Number NN of 2013
Date of Signature: DDMMYY

When that's filled in with data, the act has been passed and promulgated (signed by the Pres.).

http://www.oireachtas.ie/viewdoc.asp?DocID=22833&&CatID=59

Many thanks.

pico24

AVC's are a good idea, they come from your gross income.

I also dont think its a bad idea to hedge your fund
ie. 50% equities, 25/25 cash/bonds

Personally I have moved all my avc's from equities to cash and bonds last month and i'm not due to retire for 32years
Reason being I think the run in the markets is coming to an end and are due to pullback
When I think its plateaux'd, I'll move them back to equities.
I could be wrong, I could be right

ibebanging

ibebanging wrote: »

Many thanks.

Looks to me as if its signed off now. Anyone any idea what happens next ??