AVCs

Prudential "Early exit penalty" for members making 1^st AVC contribution after July 2012

Prudential have announced that they will introduce an "Early exit penalty" to all new members who join the In-house AVC scheme from 19 August 2012 and who withdraw their funds within five years.  

The new rule will not apply to existing members, and there is no change to their annual management fee which varies according to the individual fund(s) selected and which will continue to be applied to both existing and new members.

Prudential has introduced this charge in response to a significant increase in short term contributions where the annual management fees collected do not cover the initial set-up costs.  

Against this backdrop both the Fund and Prudential believe this solution to be fair to all members, as it ensures that neither longer term nor existing members are impacted.

The early exit penalty will be applied on a sliding scale over 5 years of first becoming an AVC member and it is as follows;

First year: 15%
Second year: 10%
Third year: 8%
Fourth year: 6%
Fifth year: 5%

The future of above percentage is subject to review in light of experience.

Prudential have stated that where the retirement is within 5 years and is on the grounds of Tier 1 ill-health, then there will be no early exit penalty applied to affected members' AVC monies.

The AVC facility remains a tax-efficient way of saving for your retirement and new and existing members saving for the longer term will be unaffected.

For those currently considering making AVC contribution, where contributions are made prior to the August 2012 payroll run, i.e. from the July 2012 payroll run, those members will avoid any exit policy as this will only be introduced for new members who elect to make AVC contributions and subsequently withdrawal the investment within 5 years, where the 1^st contributions is made after the July 2012 payroll run.

For further information please contact Prudential direct on 0845 607 0077

Or visit the website:

http://www.pru.co.uk/content/schemes/localgovavc/ 

Alternatively contact the Fund’s Member Solutions Officers on 01902 551173 for more details about how AVCs could work for you.