The Teachers AVC with Prudential is a Money Purchase (or Defined Contribution) scheme, unlike the main Teachers Pension which is a Defined Benefit (or Final Salary) scheme.
This means that rather than having a guarantee on future income based on your earnings and the amount of time you have contributed like the main Teachers Pension, the benefits you get will depend on the amount that you have saved, it’s growth and your choice of converting the pot into retirement income.
Once you have reached the point that you want to take benefits from your Teachers AVC you should weigh up your options carefully and not just select from the income choices offered by Prudential – in fact doing this will in all likelihood limit your choices and cost you money.
You can take up to 25% of the fund as tax free cash and then the remainder of the fund has to be used to provide an income which is potentially taxable.
Due to the current low annuity rates and the inflexibility of annuities, many teachers are looking for alternative ways to use for their AVCs – particularly since pension freedoms have been introduced.
The option to take advantage of these freedoms is not available within the Teachers AVC. This however doesn’t mean that your AVCs can’t be used to take advantage of the new pension freedoms but it will need to be moved to a new plan that will.
We have helped many teachers get the most from their Prudential AVCs through drawdown as well fixed term or conventional annuities.
The value of investments may fall as well as rise. You may not get back the full amount that you originally invested